Critics of the antitrust laws plausibly argue that these laws serve in the end merely to punish, restrain and burden the most successful competitors of every market, thereby causing enormous injury to competition. They argue that the antitrust laws harm the very thing they say they are intended to protect — competition in the marketplace.
For these critics, the antitrust laws are self-contradictory, self-defeating nonsense. Worse than that, they are an expensive nuisance and a crippling burden to our most successful firms, and our economy cannot afford such burdens in this new era of globalization and outsourcing.
The critics have a point. Antitrust laws are uncertain in their application, and compliance with them can be onerous and expensive. If a firm is sued in antitrust case , it will likely be obliged to pay substantial or onerous sums to its attorneys and experts, and some of its key officers will have to devote much of their time to preparing the firm to defend itself in the case.
In the meantime, the firm will likely suffer bad press. But the alternatives are worse. These firms would not only exclude all other competitors, but would sooner or later impose unfair trading terms on their business partners and ultimate customers, while failing to keep fit and responsive because of the dearth of competition from rivals.
Indeed, this happens all the time in actual practice, and the proper remedy is usually antitrust intervention — a private lawsuit or public prosecution. Unfettered competition leads to monopolies in many kinds of commerce. Monopolies in turn tend to become unresponsive to customers, less efficient, and above all more likely to impose abusive trading terms in the markets that they control.
The antitrust laws do not outlaw monopolies, but they forbid a firm to acquire or maintain a monopoly position by means of commercial practices whose principal purpose and effect are to undermine rival businesses. Antitrust penalties can be severe: The government can seek criminal convictions, prison terms, and stiff fines.
We need antitrust laws to redress the fundamental contradiction of marketplace economics: Competition, which yields the best products and greatest prosperity, tends to lead to efforts at monopolization and to trading abuses that can be checked only by stifling regulation or well-conceived antitrust intervention. Yes, the antitrust laws are horrible, ruinous abominations that arise from an inextricable contradiction that they do not resolve, and they involve us all in wasteful litigation and suffering.
But as Winston Churchill might have said, the antitrust laws have the benefit of being better than the alternatives. Senator Amy Klobuchar D-Minn. Feb 21, Antitrust Litigation and Counseling. The Extraordinary Qualcomm Case.
The defining antitrust issues of our time are at stake in the landmark case of Fed Trade Comm'n v. Qualcomm Inc. Qualcomm specifically concerns standard-essential patents and Sep 8, Antitrust Litigation and Counseling.
The United States Department of Justice has reportedly begun an antitrust investigation of four major automakers for possible unlawful collusion in violation of United States antitrust law.
The cause of this investigation? The automakers tentatively agreed with the Get Consultation Call Now. Why Antitrust Laws Matter? By William Markham, The Origins of the Antitrust Law Antitrust law is the law of competition. Anti-Business or Pro-Competition? We do not want one baker, or a group of bakers, to destroy competition in their local market so that they can then force the customers to submit to higher prices, less responsive service or poorly baked bread The Besetting Flaw of Market Economics The antitrust laws exist not to punish or dismantle successful, prosperous companies, even the most dominant global monopolies of the era.
What Antitrust Laws Try to Accomplish Antitrust laws, properly understood, are intended to grapple with this market contradiction. I think these charter principles and their corollaries can be summarized as follows: Monopolization. Curse or Blessing? If you don't let the players play -- or, in market terms, if you try to over-regulate the competitive process -- you can ruin the game. Markets are rough places and, though competition is not always pretty, allowing it to flourish is ultimately in our best interest.
As Arnold put it, "[t]he economic philosophy behind the antitrust laws is a tough philosophy. They do not contemplate a game in which everyone who plays can win.
To elaborate on this last point, let me be clear in saying that I believe a great mistake is made when the antitrust laws are used to protect competitors rather than competition, as has occurred too often in our history. It may make sense to assign handicaps in a golf game or to require certain horses carry weights in their saddle-bags during a race, but that kind of handicapping is not appropriate in the market. In keeping a watchful eye on the marketplace, we are concerned with consumers, not competitors, and even if it's boring to see the same person win over and over again, as long as those victories are based on economic efficiency, it will be good for consumers and the antitrust enforcers ought to stay out of the way.
In the same vein, it's important to emphasize that big is not necessarily bad when it comes to antitrust enforcement. Bigness can lead to efficiency -- though a synergistic merger, for example -- which in turn is good for consumers.
Arnold emphasized this point as well, having explained that "it is as meaningless to say that small [business] units are better than big units as it is to say that small buildings are better than big ones. I want to assure you that we will resist any such temptation. These kinds of notions -- antitrust ought to help weaker competitors, or big is bad -- simply have no place in a sensible enforcement program.
But, as I said earlier, just as using antitrust law to implement social policy is a mistake, so too is a religious faith in self-correcting markets. There is a need for antitrust enforcement to aid the free market and, at its legitimate core, such a role focuses on assuring that market power doesn't restrain competition that consumers would otherwise enjoy.
And a properly focused concern about market power, in turn, requires surgical intervention precisely because businesses benefit from efficiency and market power alike, whereas consumers benefit from the former but not the latter.
So our job is to make sure that we take out the fat market power without taking out the muscle efficiency. All of that history is well and good, some say, but they then go on to question whether the existing antitrust laws can possibly be relevant to today's economy. The Sherman Act was passed in in response to the nationwide industrial trusts that the railroads had made possible, and the Clayton Act was passed in and was aimed largely at retailing and wholesaling practices in localized markets.
How, then, can these ancient statutes be relevant to a 21st Century, information-based, economy? I get asked that question, especially by non-antitrust-lawyers, probably more than any other. And I answer, unhesitatingly, that the laws are just fine, precisely because, unlike most contemporary statutes, they are common-law provisions and, therefore, they are not locked in text or time. People today don't fully appreciate the genius of the common law, but I believe that we in the antitrust field are fortunate to be a part of this declining heritage.
To take an analogy that I find apt, the "freedom-of-speech-and-press" clauses of the First Amendment to our Constitution were enacted at a time when speech and print were the only two media. Today, of course, we have radio, t. Yet no one really thinks that we need a new First Amendment.
The core principles of that provision, developed through over two centuries of case law, have been effectively and sensibly applied to these new media, just as they were once applied in a world without them. In this fundamental respect, as Chief Justice Charles Evans Hughes among many others correctly recognized, "[a]s a charter of freedom, the antitrust laws have a generality and adaptability comparable to that found to be desirable in constitutional provisions.
When it comes to the antitrust laws, the core principle, as I just mentioned, is to prevent agreements or mergers that create or increase market power, or unilateral actions that use existing market power to protect or expand a monopoly. As you know, of course, that's what the three key statutory provisions actually do: section 1 of the Sherman Act bars anticompetitive agreements, section 7 of the Clayton Act bars anticompetitive mergers, and section 2 of the Sherman Act prohibits the abuse of monopoly power.
In combination, these provisions are fully adequate to deal with the contemporary economy. Indeed, as I will now show, many of the so-called "new" economic issues really aren't so new to antitrust enforcement after all.
As with the First Amendment, we have a venerable body of case law -- not every one rightly decided, but as a corpus rich in detail and complexity -- that we can and will draw on as we work through antitrust issues in the new economy. Let me then turn to the software industry, which is obviously paradigmatic of the new economy, and discuss some of the issues currently on our agenda.
As I have already suggested, the core principle about market power that animates our concern here should be no different from what it has been since the inception of the antitrust laws: competition is good and market power can undermine it. To be sure, in analyzing market power issues, we must take cognizance of any differences that might characterize the specific market under consideration. So, for example, in high tech markets, we need to determine whether the market is likely to experience a tipping point as a result of so-called network effects, or whether it is likely to be marked by price competition, innovation competition, or both.
For those who are not familiar with the latest jargon, the concept of "network effects" refers to those markets in which particular services or products become more valuable as more people use the network, be it a telephone network or electronic mail. Although these potential new wrinkles in high-tech markets raise important questions, I want to make clear that they are hardly so novel -- and certainly not nearly as intractable -- as some have suggested.
Indeed, in , the Antitrust Division won a tying case against IBM, involving tabulating machines and cards, in what was surely then considered a "new" industry. And some forty years ago, we brought a case involving network effects in the floral-delivery market and secured relief that made competing networks possible. By the same token, while price competition has generally been the paramount focus of antitrust enforcement, innovation competition, which appears to be very important in the new economy, is no stranger to our field either.
On the contrary, if you go back and study some of the earliest monopoly cases, such as Alcoa and Kodak , you'll see that the courts were concerned with technology innovation and suppression as well as with price competition.
And almost thirty years ago, the Justice Department brought what was probably the first pure innovation case, concerning a horizontal agreement among auto makers not to develop certain pollution technologies.
Nor is there any reason to think that our customary concerns about price competition are somehow irrelevant in high-tech industries. In high-tech industries, as in others, market power often leads to price increases. But if the products are tied together and sold at a single price, how can anyone say that the browser is free? More importantly, even assuming Microsoft gives away its browser, that is, of course, a traditional, long-standing antitrust concern -- though not necessarily a violation -- because free is a curious price.
After all, Microsoft spends a lot of money developing and marketing its browser. So why would it give it away for free? There are two potential reasons -- one legitimate, one not. The former is that revenues from an ancillary or future stream of commerce make a for-free strategy economically rational. For example, a newspaper may be given away in order to build up a large base of subscribers, which, in turn, will attract advertisers that pay enough to justify a for-free subscription price.
It is also possible, however, as many cases have found, that a no-cost product is one intended to protect or establish monopoly power and, if that's what's going on, then the strategy is predatory and it violates the antitrust laws.
This kind of fact- based question about predation is as old as the antitrust laws themselves. What all of this proves, I believe, is that the issues raised by antitrust enforcement in high-tech industries are not nearly so new as some may think. Ironically, perhaps the most novel of the phenomena that tend to characterize the software industry in particular -- i.
Moving beyond some of the general issues raised by applying the antitrust laws to a high-tech industry like software, I now want to address the specifics of the Microsoft case itself.
Let me start with the fact that it is clear to us and, I believe, generally agreed by most observers, that Microsoft currently has a monopoly in personal computer operating systems. Operating systems are the kind of products that are characterized by network effects, and Microsoft has such a large installed base of customers that it is not going to be easy for a potential competitor to challenge its monopoly. Now, beginning from this understanding of Microsoft's market position, let's turn to the issue of new products and how they are bundled or tied to the operating system.
And let's think -- as the Antitrust Division must think when it makes policy -- not only about browsers but about other products as well -- for example, personal finance or electronic commerce software. I don't want to analyze all of those issues tonight but, as we move forward, I would like you to be thinking whether there are different competitive considerations relevant to each of these products or whether Microsoft should be allowed to bundle any and all of them with its operating system.
I would also like you to think about whether such bundling, especially in a network industry, makes it harder and harder for a new entrant to challenge Microsoft's monopoly position in operating systems.
In the consent decree case that we brought, we identified two, related, anticompetitive effects that concerned us. First, there was a specific browser effect, as to which some people have asked, "what's the big deal, anyone who wants Netscape's browser can get it? And healthy competition among sellers in an open marketplace gives consumers the benefits of lower prices, higher quality products and services, more choices, and greater innovation.
The core of U. These laws have evolved along with the market, vigilantly guarding against anti-competitive harm that arises from abuse of dominance, bid rigging, price fixing, and customer allocation. Antitrust laws ensure competition thrives, providing consumers with lower prices and higher-quality products and services.
However, some seek to rewrite these laws and undermine consumer power in the marketplace. Sign up to receive the latest news, resources, and event updates related to antitrust. Learn More.
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