Silicon Valley Antitrust

Hanno Kaiser University of California, Berkeley, School of Law, Spring 2012

Friday 8 - 9:50 am, Room 10

Evolving Syllabus! Please check out the latest version

Textbooks:

• Herbert Hovenkamp, Black Letter Antitrust Law (2011)
• Herbert Hovenkamp, Innovation and Competition Policy: Cases and Materials (2011)

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.”

a. 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?

b. 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)

c. Optional reading

• 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.

a. Topics for discussion

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

b. 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.

c. Optional reading

• 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)

a. Topics for discussion

• The anticompetitive strategies playbook
  • Combination
  • Exclusion
  • Leveraging
• Indirect “defensive” strategies in multi-sided markets

b. 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)

c. Optional reading

• 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)

a. 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.

b. 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 bSpace (tying claim).

c. Optional reading

• 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?

a. 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

b. 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)

c. Optional reading

• 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)

a. Topics for discussion

(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?

b. 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.

c. Optional reading

• 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)

a. 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

b. Required reading

• European Commission, Press release re Samsung FRAND abuse investigation (January 31, 2012)
• Broadcom v. Qualcomm, 501 F.3d 297 (3rd Cir. 2007)
• Rambus v. FTC, 522 F.3d 456 (D.C.Cir. 2008)
• FTC, In the matter of N-Data (2008)

c. Optional reading

• Research in Motion Ltd. v. Motorola, Inc., 644 F. Supp. 2d 788 (N.D. Tx. 2008)
• Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492 (1988)
• Intergraph Corp. v. Intel Corp., 195 F. 3d 1346 (Fed. Cir. 1999)
• Kaiser & Wall, The Meaning of Rambus (2008)
• Florian Mueller’s FOSS Patents Blog

Class 8: Patent portfolio acquisitions (March 2, 2012)

a. Topics for discussion

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

b. 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?

a. 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 (Andorid, iOS, Blackberry, Windows), online stores (eBay, Amazon)

b. Required reading

• Kaiser, Are Closed Systems an Antitrust Problem?, Competition Policy International 91, Vol.7, No.1 (2011)
• Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451
• Apple, Inc. v. Psystar Corp., 586 F. Supp. 2d 1190 (N.D.Cal. 2008)
• Datel Holdings Ltd. v. Microsoft Corp., 712 F. Supp. 2d 974 (N.D. Cal. 2010)

c. Optional reading

• 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?

a. Topics for discussion include:

• 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

b. Required reading

• FTC/DOJ, 2010 Horizontal Merger Guidelines
• U.S. v. Oracle Corp., 331 F.Supp.2d 1098 (N.D.Cal. 2004)

c. Optional reading

• J. Thomas Rosch, Lessons from Oracle
• Case No COMP/M.5984 - INTEL / MCAFE
• Case No COMP/M.6281 - MICROSOFT/ SKYPE (2011)

Class 12: Mergers: Differentiated and future products, Part 2 (April 6, 2012)

a. Topics for discussion include:

• Unilateral effects in U.S. v. Oracle
• How U.S. v. Oracle influenced the 2010 Horizontal Merger Guidelines
• Potential competition and innovation markets

b. Required reading

• FTC, In the matter of Thoratec and HeartWare, Docket No. 9339, FTC File No. 091 0064
• Kaiser & Wall, What the new merger guidelines mean for technology companies (2010)

c. Optional reading

• Carl Shapiro, Joseph Farrell, Mergers with unilateral effects, presentation (2008)

Class 13: Open source & social networks (April 13, 2012)

a. Topics for discussion include:

• What’s the difference between free software and open source software?
• Zero-price fixing? Share alike licenses in court.
• Social networks and virtual currencies

a. Reading materials

• Wallace v. IBM, 467 F.3d. 1104 (7th. Cir. 2006)
• Newman & DeWors, Facebook Credits Whitepaper (2012)
• Facebook Credits Terms

b. Optional reading

• Tim Rogers, Who killed videogames? (2011)
• Mark Silva, Social Gaming, Too Big to Ignore
• Cory Doctorow, Censorship is inseparable from surveillance (2012)
• Jacob Appelbaum, Keynote linux.conf.au
• Richard Stallman, The Free Software Definition
• Eben Moglen, The Freedom Box (2010)
• ConsumerWatchdog, Complaint to the FTC re Facebook Credits (2011)
• ConsumerWatchdog, Analysis of revised FB Credits Terms (2011)
• Wikipedia, EVE Online
• Wikipedia, Facebook Credits
• faberNovel, Business Models of Open Source and Free Software (2007)
• M.5529 Oracle / Sun Microsystems, Commission Decision (2010)

c. Seriously optional reading

• Neal Stephenson, Reamde (2011)
• Cory Doctorow, For the Win (2010)
• Ernest Cline, Ready Player One (2010)

Class 14: Mergers affecting future products and the DOJ complaint in re eBooks (April 20, 2012)

a. Required reading

• See required reading for Class 12 (we’ll discuss the Thoratec case that we didn’t get to on April 6)
• Complaint U.S. v. Apple, Hachette, et al. (April 11, 2012)
• Washington Post, Apple denies Justice charges, says they’re ‘not true’ (2012)

b. Optional reading

• Cory Doctorow, A Whip to Beat us with (2012)

Class 15: Review session (April 27, 2012)