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Thinking about a New Epoch in Antitrust Law (and One Timeless Tip). This week, we look at some of the larger themes of U.S. antitrust law, ask if the Federal Trade Commission’s newly amended complaint against Facebook triggers a new “epoch” in antitrust law, and offer one timeless tip for avoiding antitrust issues.

The FTC’s new filing:  Earlier this year, a federal judge dismissed two antitrust complaints against Facebook, one filed by the FTC, and one filed by 48 states attorneys general.  Because the complaints were dismissed “without prejudice”, the FTC refiled in order to set forth its allegations in more detail. The amended complaint describes chapter and verse of the FTC’s antitrust theory that Facebook has used its market power to throttle competition, particularly in the mobile space.  You can read the FTC’s amended complaint by clicking on the following link:

Start with general principles:  From the formative years of antitrust law, which focused on monopolistic and oligopolistic market structures, to the present, which focuses more on price theory, some principles have found wide and continuing agreement. For example, in totality, antitrust law is designed to protect “competition” generally, not “competitors” in particular (though private rights of action are available). We all want robust competition, innovation, low prices, high outputs, wide distribution of information and so forth; and in determining whether antitrust law is productive of these ends, clear-eyed analysis of economic efficiency – not political trends, “protecting small business,” or other “populist” objectives – is critical. 

Fly through antitrust history:  Naturally, how all this gets applied has been subject to vast upheaval over the years, as economic analysis, world events, and politics have all evolved. This evolution has seen definable “epochs” in antitrust law, from its beginnings in the “Gilded Age,” through the evolution of the “rule of reason” in the “Progressive Era,” through and past the regulatory control-and-reaction era of the Depression, New Deal and World War II, and from the 1970’s and into the present in the contest between the “Chicago School’s” abiding faith that producers, capital, and consumers will arrange markets in whatever way is most efficient and the “Harvard School’s” skepticism that this will necessarily happen.

You can read about this in Laura Phillips Sawyer’s excellent working paper No. 19-110 for the Harvard Business School, which you can find by clicking the following link:

Are we seeing the start of a new “epoch?”  We think so.  But we don’t think we should zero in on the details of FTC v Facebook.  Dramatic as it may be, it will only be one case in what will likely be a boiling stew of different public enforcement cases, Hart-Scott-Rodino Act rulings, perhaps still more merger guidelines, and perhaps a resurgence of the 1970s’ and early 1980s’ “golden age” or private antitrust litigation – all focused on what antitrust law should mean not in the Ages of Steel, Aluminum, or Telephones, but in the Age of Data and Tech (“Big” or otherwise).   

Watch FTC v Facebook and other cases with the following principles in mind:  

(a)   Big isn’t necessarily Bad.  The object of antitrust is economic efficiency – lowest prices, most products, best quality for the most people, etc.  If a big supplier can offer more and better products to more people at lower (assume non-predatory) prices than a gaggle of smaller, less efficient ones could manage, then why not let it carry on?  Remember, too, that “economies of scale” (where the more of them you buy, the less supplies cost) and “network effects” (where things are more valuable the more people have them, e.g. telephones) are real and valuable.   

(b)  Big isn’t necessarily Good, either. “Barriers to entry” – where entry by new competitors would take too long, cost too much, or be unsupportable in the market – are real too, and deadly serious, though Chicago and Harvard Schools of thought may quibble over when, how “real” they are and by how much.  Anyway a supplier that can stay too invulnerably entrenched may hoover up the market to itself and raise prices to everybody (“charge monopoly rents,” as economists would say). Even where markets require unified, essential services, those services are commonly regulated as utilities. (At the risk of giving our Chicago-School friends the “vapors,” should regulation of “essential services” be reviewed more closely and considered more seriously in the “Digital Epoch?”)

(c)   Break-up fights can be long, expensive, and inconclusive.  IBM fought the Justice Department “hammer and tongs” for 13 years through five administrations. DOJ finally gave up, but think about it: IBM won the war, but since then, has IBM ever had the dominant position it had then?  AT&T fought for awhile and then split itself a long-distance provider and 8 Regional Bell Operating Companies – which have morphed, re-combined and met much success.  Alcoa fought for years – but then market conditions changed, new entrants appeared out of nowhere, the DOJ quit insisting on a breakup and Alcoa resumed its profitable swim in the stream of commerce. 

(d)  Keep your eye on the definition of “Market:” For generations, antitrust lawyers and scholars have known that the wonky, often-overlooked key to antitrust analysis has been the definition of exactly what “market” is at issue.  Once you define the “market” – and therefore define what’s “outside” – then much of the consequential analysis will often follow near-automatically. So here:  What is the “Market” over which Facebook has too much control? Is it “mobile” (meaning what)? Or “data,” “social networks,” or “algorithmic pushing of personal information?” What are the boundaries of that “market?” 

 A Vital Tip for Avoiding Antitrust Issues No Matter What Size Your Company Is:

Finally, FTC v. Facebook aside, here’s a timeless reminder:  Price-fixing, bid rigging, and similar agreements between “horizontal” competitors have always been per se illegal — are now per se illegal — and for as far as the eye can see or the mind imagine, will always be per se illegal. 

Per se illegal in this usage means, “5-year federal felonies, with treble damages to civil plaintiffs, with virtually no available defenses.”

Don’t let your clients come anywhere close to doing this.  Absent a closely-supervised Noerr Pennington exception for political speech and petition, tell them plainly:

(1)   Do not to speak to competitors at all, about anything except sports, families, or the weather; and

(2)   When they must encounter one another (e.g. in trade associations, or conventions), then:

(a)        make sure the association has a lawyer present at each meeting to keep the discussion within antitrust boundaries.  If the association won’t keep to an antitrust policy and enforce, don’t remain a member and don’t attend the meetings; and

(b)       remember that even with all the policies and warnings in the world, at each irregular “meeting” at the bar or after hours, there’s bound to be somebody there with a cell phone switched to “record.”

Hosch & Morris, PLLC is a boutique law firm dedicated to data privacy and protection, cybersecurity, the Internet and technology. Open the Future℠.