Silicon Valley Antitrust v.7 (Fall 2017)
Hanno Kaiser. University of California, Berkeley, School of Law, Room 170
Friday, 8 am (sharp!) - 9:50 am
Note that this is an evolving syllabus, as we will discuss key issues of technology antitrust using current cases and materials. In other words, stuff on this website will change during the course of the semester.
Class 1: Technology Antitrust: A Framework and a Baseline Case
August 25, 2017
Topics for discussion
- 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
- The impact of the current administration on the rule of law in general and antitrust enforcement in particular
Reading Materials
Optional
Class 2: Disruptive Business Models or Illegal Cartels (Part 1)
September 1, 2017
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 Materials
- Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1 (1979). Excerpts
Optional
Class 3: Disruptive Business Models or Illegal Cartels (Part 2)
September 8, 2017
Topics for discussion
- More about vertical and horizontal agreements in the age of ecosystem competition (e.g., Google v. Amazon v. Apple, etc.)
- Apple: The U.S. v. Apple “eBooks” case (2015)
- Disruption via de novo entry as per se illegal antitrust violation?
- Uber: The Meyer v. Kalanick case (2017)
- A closer look at the “agreement” prong: Algorithmic collusion by way of “joining a platform?”
Reading Materials
- United States v. Apple, Inc., 791 F.3d 290 (2d Cir. 2015). Excerpts
- Meyer v. Kalanick, 174 F. Supp.3d 817 (S.D.N.Y. 2016). 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.)
- United States v. Adobe Systems, Inc., Apple Inc., Google Inc., Intel Corporation, Intuit, Inc., and Pixar (2010) Complaint. (The U.S. v. Adobe et al. “hiring” case (2016) is about collusion in upstream labor markets; interesting because many of the firms involved are not downstream competitors.) In that context, see also: DOJ/FTC, Antitrust Guidance for Human Resource Professionals (October 2016)
Class 4: An in depth look at Algorithms and Collusion. New normal or smoke without fire?
September 15, 2017
Topics for discussion
- Demand/supply coordination as a key function of many multi-sided platforms
- Pricing algorithms and collusion
- What is not an algorithmic collusion case (e.g., organizing a cartel via encrypted messaging)
- Simple test
- Replace computers and algorithms with humans—does that change the analysis?
- Are there “plus factors” akin to (e.g.) regular meetings?
- Duty to encode “collusion avoidance” into commercial pricing algorithms?
- The critical role of the (evolving) “no intracompany conspiracies” rulea
- Employees = intra-company?
- Independent contractors = inter-company?
Reading Materials
Optional
Class 5: Platform Wars and the Modern Law of Monopolization (Part 1)
September 22, 2017
Topics for discussion
- Laying the groundwork for unilateral conduct cases. A first look at market definition in the ideal world (SSNIP) and the real world (documents, customers, win/loss data)
- Monopolization and abuse of dominance cases in the high tech sector
- U.S. v. Microsoft (2001)
- EC v. Google/Search (2017)
- German Federal Cartel office investigation of Facebook (ongoing)
- What makes a firm dominant?
- Network effects and market power (Operating systems and applications; mobile operating systems and services; internet search; social networks; messaging applications, etc.)
Reading Materials
Optional
Class 6: Platform Wars and the Modern Law of Monopolization (Part 2)
September 29, 2017
Guest Speakers (9 am - 9:30 am)
- Frank Li, Antitrust Counsel at General Electric, former Deputy Director at the Antimonopoly Bureau, Ministry of Commerce (MOFCOM)
- Hui Xu, Partner, Latham & Watkins LLP (Shanghai)
Topics for discussion
- What constitutes an abuse of a dominant position?
- Exclusionary strategies (exclusion, leveraging)
- Exploitative strategies (e.g., in the EC)
- Exclusion in the U.S. v. Microsoft case
- The special importance of intermediation layers (such as Java and the JVM) for the analysis of entry barriers and market power
Reading Materials
Class 7: “Commingled Code,” “Embrace, extend, extinguish” and Tying
October 6, 2017
Topics for discussion
- Common abuse patters in the technology world
- “Commingled code”
- “Embrace, extend, extinguish”
- Tying
- 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
Reading Materials
Optional Reading
Class 8: The European Commission’s Google Search Case
October 13, 2017
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
Required reading
- European Commission, Antitrust: Commission fines Google €2.42 billion for abusing dominance as search engine by giving illegal advantage to own comparison shopping service, Factsheet (June 27, 2017)
- FTC, Statement of the Federal Trade Commission Regarding Google’s Search Practices - In the Matter of Google Inc. (January 3, 2913)
Class 9: The European Commission’s Google Android Case
October 20, 2017
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
Required reading
Optional reading
Class 10: Open and Closed Systems: Aftermarkets
October 27, 2017
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"
Required reading
Optional reading
Class 11: Zero-Price Markets and Attention Markets
November 3, 2017
Topics for discussion
- Free?
- As in “freedom”
- As in “gift”
- As in “zero-price”
- Defining relevant product markets in the absence of price signals
- SSNIP
- QSSNIP
- “Data” as “price”?
- The concept of competition for eyeballs and user attention
- “Attention Brokers”
- Market power in attention markets
- The significance of supply-side substitutability in zero-price markets
- Anticompetitive conduct in zero-price markets
- Zero-price fixing (GNU/Linux)?
- Tying (free to paid, free to free)
Required reading
Optional reading
Class 12: Standard Setting and Standard Essential Patents
November 17, 2017 (usual time 8 am, Room 170)
Topics for discussion
- Standard setting implies that competitors agree not to compete on certain technologies. Why is that legal?
- Imagine a world without standards, e.g., power plugs, rail gauges, phone networks, the internet (TCP/IP), the world-wide web (HTTP), eurorack, etc.
- Are all standard wars inefficient? (VHS v. Betamax; BlueRay v. HDDVD; Windows v. everyone else)
- The “market power by-product of standard setting”: standard-essential patents (“SEP”)
- Market power from patents v. market power from agreements about patents
- Managing the risk of SEP hold-up
- Elimination of bias in the standard setting process
- Disclosure of patents
- Licensing of patents
Required Reading
Optional Reading
Class 13: The Smartphone Wars (not part of the exam)
November 17, 2017 (mandatory make-up class, 1 pm, Room 170)
Topics for discussion
- The origins of the Smartphone wars: telcos v. computer companies
- Who should get how much of a new category of devices that amalgamate telecommunications and computer technologies?
- Who contributes what? Features v. standards.
- Identifying the key questions
- Injunctions: Should holders of patents that they (a) declared essential to a standard and (b) promised to license on fair and reasonable terms be permitted to seek injunctions against implementers?
- Royalties: Who should determine a reasonable royalty for standard essential patents and how should this royalty (rate and base) be determined?
Required reading
- Art. 102 TFEU
- Case C-170/13 Huawei v ZTE (European Court of Justice) (July 16, 2015) Please read the judgment of the court, which is the first document on the web page and then focus on the holding after para. 77.
Optional reading
Class 14: Review: Putting it all together (and on paper)
December 1, 2015
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
- 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
- Finish
- Q&A
Required reading
Summary Charts/Key Concepts (Updated)
Policy, Tangents and Detours (not mandatory)
A (very incomplete) list of interesting technology books (not mandatory)
- Sterling, The Hacker Crackdown: Law And Disorder On The Electronic Frontier (1993)
- Barlow, A Declaration of the Independence of Cyberspace (1996)
- Shapiro, Varian, Information Rules (1998)
- Raymond, The Cathedral and the Bazaar (1999)
- Kent, The Ultimate History of Video Games (2001)
- Kushner, Masters of Doom (2004)
- Evans, Haigu, Schmalensee, Invisible Engines (2006)
- Post, In Search of Jefferson’s Moose (2009)
- Kirkpatrick, The Facebook Effect (2010)
- Levy, Hackers (2010)
- Levy, In the Plex (2011)
- Assange et al. Cypherpunks (2012)
- Greenwald, No Place to Hide (2014)
Recommended antitrust resources (not mandatory)
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