Antitrust Enforcement Agencies Research Articles

Evolution of the Merger Guidelines: Is This Fox Too Clever by Half?

The 2023 Merger Guidelines make some notable improvements over the 2010 Horizontal Merger Guidelines. They give greater emphasis to the idea that predicting the competitive effects of a proposed merger is inherently difficult and that to block a merger the government need only show a risk that the merger may substantially lessen competition – not that it will do so. They also give greater emphasis to dynamic competition and innovation – especially with regard to acquisitions of potential entrants – and they add useful material on multi-sided platforms. However, the treatment of market definition in the 2023 Merger Guidelines may weaken horizontal merger enforcement by demoting the role of the “hypothetical monopolist test,” which is used to define markets for the purpose of measuring market shares, and by removing extensive material from prior guidelines that explained why market shares measured in narrower markets tend to be more informative than market shares measured in broader markets. The 2023 Merger Guidelines lower the market concentration thresholds that trigger a presumption by the antitrust enforcement agencies that a merger may substantially lessen competition, but the enforcement data suggest that change will have little effect in practice. The 2023 Merger Guidelines also may lead to less effective deterrence of harmful mergers because they are not well targeted at the mergers that are most likely to substantially lessen competition. One cannot prioritize everything.

Research on Anti-monopoly Regulation of the MFN Clause on Internet Platforms

With the continuous development of electronic information technology, internet companies are playing an increasingly important role in the business field. This evolution has not only catalyzed shifts in business models and transaction habits but has also introduced novel practices, such as the integration of Most-Favored-Nation clauses (MFN clauses) that were formerly exclusive to traditional business domains. Currently, MFN clauses are widely used in commercial activities between internet platform companies, which require high attention from antitrust enforcement agencies. Through a comprehensive analysis of existing literature and research, this study aims to shed light on the similarities and differences between these two types of MFN clauses, offering valuable insights into the evolving landscape of business practices within the digital age. In addition, the article also uses case analysis to examine two typical cases in foreign jurisdictions, demonstrating the regulatory approaches of the extraterritorial judiciary towards MFN clauses within internet platforms. Based on the analysis, the conclusion of this paper is that the for collusive MFN clause, the illegal per se doctrine should be applied for exclusive MFN clause, the principle of reasonableness should be applied, taking account of both the effects on restricting and promoting competition.

ANTITRUST AND INEQUALITY

ANTITRUST AND INEQUALITY

Monopoly and corporate innovation: evidence from antitrust law

PurposeThere are two opposite views about whether the Antitrust Law is conducive to the development of the economy. One view is that the Antitrust Law can restrain monopoly, maintain market competition and benefit economic growth. The other view is that the Antitrust Law inhibits innovation by monopolistic firms and fosters rent-seeking, which is bad for economic growth. To provide a possible perspective for clarifying the controversy, this paper aims to answer the following two questions: first, will the Antitrust Law inhibit corporate innovation? Second, does the antitrust enforcement agency discriminate against private enterprises?Design/methodology/approachBased on the samples of A-share listed companies from 2003 to 2013, the authors use the implementation of China’s Antitrust Law in 2008 as a policy shock, take the monopoly enterprises in each industry as the treatment group and competitive enterprises as the control group, using the difference-in-differences method to test the impact of the implementation of the Antitrust Law on corporate innovation activities.FindingsThe results show that compared with competitive enterprises, the patent output of monopolistic enterprises was significantly reduced after the implementation of the Antitrust Law, which indicates that the Antitrust Law does inhibit the innovation activities of monopolistic enterprises. Further research finds that the innovation suppression effect of the Antitrust Law is more prominent in state-owned enterprises, which means that the government does not have “selective law enforcement” against private enterprises in the process of law enforcement. Therefore, the results provide evidence for the idea that government intervention is neutral.Originality/valueFirst, the paper enriches and expands the research on the factors affecting corporate innovation from the perspective of market structure. Second, it enriches and expands relevant research on the consequences of implementing the Antitrust Law from the perspective of corporate innovation. Third, it not only provides the relevant empirical evidence for clarifying the dispute about the Antitrust Law but also is helpful to clarify whether the Chinese Government has “selective law enforcement” against private enterprises.

Competitive Harm from Vertical Mergers

The antitrust enforcement Agencies’ 2020 Vertical Merger Guidelines (VMGs) introduce a nontechnical application of bargaining theory into the competitive assessment of vertical acquisitions. This bargaining theory has much in common with the theory of unilateral effects that is applied to horizontal mergers. The VMGs focus on post-merger price increases requires consideration of a vertical merger’s role in eliminating double marginalization (EDM). The problem occurs when two bargaining firms both have market power but are unable to coordinate their output. Assessing EDM bundles two themes that Ronald Coase developed in his two most well-known articles: “The Nature of the Firm” and “The Problem of Social Cost”. The first argued that the boundaries of a firm are determined by the firm’s continuous search to minimize costs. The second argued that two traders in a well-functioning market will achieve the joint-maximizing solution. Anti-interventionists rely heavily on Coasean arguments that unless high transaction costs get in the way firms will bargain to joint maximizing results. If that is true, then double marginalization will rarely provide a defense to a vertical merger. The law of vertical mergers deals largely with firms that transact with one another routinely, in legally enforceable buy-sell relationships. In a well-functioning vertical market durable double marginalization should be rare.

Pharmaceutical antitrust enforcement in the United States and Chile.

Consumers suffer from high drug prices, which stem in large part from pharmaceutical companies’ anticompetitive games. This essay discusses the crucial role antitrust enforcement agencies can play in addressing pay-for-delay settlements and product hopping and draws lessons from this enforcement. In particular, it explains how, learning from the experience with U.S. pay-for-delay settlements, the Chilean National Economic Prosecutor’s Office (FNE) should consider the potential downsides from exclusivity periods that make it easier for brand firms to keep generics off the market. And it explains how the Federal Trade Commission and FNE can target product hopping that makes no sense other than by harming the generic.

Essential Facilities Doctrine: Access Regulation Disguised as Antitrust Enforcement

This chapter describes the emergence of the EFD and reviews its development against the background of major trends in the continuing evolution of federal antitrust law. It then analyzes recent Supreme Court cases that have questioned and thereby undermined EFD, even though lower courts claim to derive the doctrine from the Court’s earlier precedents. The main focus is on the emerging recognition by the Court that ongoing economic regulation of a monopoly business under the guise of antitrust is neither consistent with the fundamentals of the federal antitrust statutes, nor with basic institutional capacities of courts and antitrust enforcement agencies, as distinct from legislatures and the purpose-built agencies that engage in economic regulation pursuant to statute. The conclusion suggested by this analysis is that EFD is no more useful as a response to concerns about access to digital platforms than to the other situations that have led to the Court’s profound doubts regarding EFD. The asserted competitive problems targeted by EFD claims may change as technology and business practices evolve, but the fatal weaknesses of EFD persist. If and to the extent digital platforms can be objectively shown to demonstrate any need for mandatory access by customers, competitors or others, mandatory access remedies should be addressed—if justified by responsible and conscientious policy analysis—through rules and institutions distinct from those of antitrust.

Competitive Harm from Vertical Mergers

The 2020 Vertical Merger Guidelines produced by the antitrust enforcement agencies introduce a nontechnical application of bargaining theory into the assessment of competitive effects from vertical acquisitions. The economics of such bargaining is complex and can produce skepticism among judges, who might regard its mathematics as overly technical, its game theory as excessively theoretical or speculative, or its assumptions as unrealistic. However, we have been there before. The introduction of concentration indexes in the Merger Guidelines was initially met with skepticism but gradually they were accepted as judges became more comfortable with them. The same thing very largely happened again when unilateral effects theories of mergers were introduced in the 1990s. The bargaining theory that drives much of vertical merger analysis today has much in common with the theory of unilateral effects. In any event, the value of a particular model depends not on its verisimilitude but rather on its testability. The theory that relates a concentration index to the risk of competitive harm from horizontal mergers involves as much conjecture as does the bargaining theory that the Nash model for vertical mergers contemplates. The concentration thresholds in the Horizontal Merger Guidelines capture a rough generalization about a large number of collusive or oligopolistic strategies, some of which are not consistent with each other. What they share in common is belief in a link between the number of firms in a market, the increase in concentration that results from the merger, and the extent of higher prices. Double marginalization as a vertical merger defense occurs when two bargaining firms each have market power but are unable to coordinate their output. Each takes a markup without considering the other, and aggregate markups are too high. Both firms as well as their purchasers would be better off if they could coordinate better. In the AT&T/Time-Warner case the defendants argued that after the merger TW would not coordinate with AT&T but would set its prices as if the merger had not occurred. In that case the merger would not have eliminated double marginalization either. The debate over the elimination of double marginalization bundles two themes that Ronald Coase developed in his two most well-known articles, The Nature of the Firm and The Problem of Social Cost. The first argued that the boundaries of a firm are determined by the firm’s continuous search to procure inputs in the most cost effective way. The second argued that two traders in a well-functioning market will achieve the joint-maximizing solution. This dual relationship is too often ignored. Anti-interventionists rely heavily on Coasean arguments that unless high transaction costs get in the way firms will bargain to joint maximizing results. If that is true, then double marginalization will rarely provide a defense to a vertical merger. The law of vertical mergers deals largely with firms that transact with one another routinely, in legally enforceable buy-sell relationships. By contrast, the actors who appear in The Problem of Social Cost do not bargain with each other regularly. In a well functioning vertical market durable double marginalization should be rare.

Unifying Antitrust Enforcement for the Digital Age

As the digital revolution continues to transform competition among businesses, U.S. antitrust enforcement has struggled to remain effective. The U.S. has long depended on a system of dual antitrust enforcement through both the Federal Trade Commission (FTC) and the Department of Justice (DOJ). Modern technology has greatly exacerbated existing structural deficiencies of the two-headed approach, at times resulting in deadlock. The two agencies approach new antitrust issues generated by computational technologies differently and fight over who should lead key investigations, leading to economic uncertainty in the most important business sectors. These enforcement disagreements can also hobble the government’s response to significant national security issues emerging from the interplay of technological competition among private companies and among nation states. Further, dual enforcement hinders government action in the newly critical area of data privacy: The agency responsible, the FTC, suffers a mission overload of enforcing both antitrust and privacy, which can work against each other. The best solution is for the DOJ to become the sole antitrust enforcement agency. First, antitrust decisions, especially in the technology arena, directly affect geopolitical competition and international relations, a province constitutionally assigned to the President. It therefore makes more sense for the DOJ, which, unlike the FTC, is controlled by the President, to direct antitrust enforcement as one piece of a larger foreign policy. Second, consolidating enforcement in the DOJ would also allow the FTC to concentrate on enforcing privacy law, free from its sometimes-conflicting antitrust mandate. Dual enforcement of antitrust law should yield to single agency enforcement, with the FTC enforcing privacy and the DOJ enforcing antitrust.

Antitrust in the Consumer Platform Economy: How Apple Has Abused its Mobile Platform Dominance

Consumer tech platforms such as Apple, Amazon, Google, and Facebook form indispensable parts of the modern economy. While their growing dominance increasingly threatens competition and consumer welfare, the outdated thinking behind current American antitrust law impedes enforcement against their abuse of power. The story of how Apple, which controls a critical gateway to the digital economy, has leveraged its dominance over the smartphone platform market to harm competition and deter the rise of future platforms provides salutary lessons and calls for special antitrust scrutiny for powerful tech platforms. This Note analyzes Apple’s violations of American antitrust law to inform ongoing litigation and investigations. It traces how Apple has abused its control of the App Store and the smartphone platform market through illegal tying and monopolistic refusal to deal, both hitherto under-studied issues. In forcing a supra-competitive 30% tax on third-party apps, blocking competitors, and favoring its own apps over rivals’, Apple’s anti-competitive practices have not only raised smartphone app prices and stunted innovation, but have also prolonged and expanded its monopoly by deterring future platforms from emerging. Using a Less Restrictive Alternative approach, the Note shows claimed benefits of Apple’s conduct are either pre-textual or unnecessarily restrictive. This Note also updates antitrust law by examining how the consumer platform economy has upended assumptions underlying traditional antitrust doctrines. Building on modern economics literature, it finds consumers and small businesses’ resource limitations, ecosystem lock-ins, and multi-layered networks create extraordinary information and switching costs, which give tech platforms immense power that their market share numbers belie. They also give platforms strong incentives to leverage their monopoly power outward, causing irreversible harm. These findings challenge traditional antitrust assumptions about rationality, market efficiency, and lack of entry barriers, which give an overly charitable view of dominant firms, and call for a rethinking of the current regime. The Note closes by proposing changes to current antitrust doctrines and enforcement. It is high time that courts reconsidered their hostility to monopoly leveraging and refusal to deal claims. Adjusting class action threshold to account for the diverse impacts of platform abuse of dominance will be critical to ensure private enforcement viability. Federal antitrust enforcement agencies will also need to step up with their resource and incentive advantages to aggressively push for evidence-finding, expanding antitrust doctrines, and helping small players where private plaintiffs fall short.

Economic Evidence in Antitrust: Defining Markets and Measuring Market Power

This paper addresses an important aspect of the interdisciplinary collaboration between law and economics: the use antitrust courts can and should make of empirical industrial organization economics, in light of the expansion of empirical knowledge generated during the last few decades. First we show how courts can apply what economists have learned about identification of alternative theories of industry structure and firm strategy to the problems of defining markets and determining whether market power has been exercised. We emphasize that the same analytic issues arise regardless of whether the evidence on these concepts is quantitative or qualitative. Second we show how courts can adopt a strategy employed in the research literature, by exploiting generalizations across closely related industries to help evaluate evidence and resolve cases. We also discuss ways of increasing the institutional capacity of the judicial system to make use of these two bodies of economic learning. These include a possible limited role for neutral economic experts in litigation, and a role for the antitrust enforcement agencies in identifying and codifying relevant generalizations about industries from the empirical economic literature to make that learning available to courts.

Challenges to the Conventional Wisdom About Mergers and Consumer Welfare in a Converging Internet Marketplace

This paper identifies substantial flaws in how U.S. government agencies and courts assess the impact of proposed mergers by firms using broadband networks to reach consumers. Based on current market definitions, consumer impact assessments and economic doctrine, antitrust enforcement agencies may fail to identify the risk of harm to consumers and competition, a so-called false negative. In recent years, the Department of Justice, Federal Communications Commission and Federal Trade Commission, individually and collectively, have assessed the competitive consequences of numerous multi-billion dollar acquisitions and have conditionally approved almost all of them. These agencies appear predisposed to favor deals that involve vertical integration between market segments, based on assumptions that short term consumer welfare gains exceed any potential competitive harms. The paper concludes that reviewing government agencies appear too willing to extend current assumptions about how “bricks and mortar” markets work to transactions occurring via broadband networks. By “fighting the last war,” these agencies fail to identify new risks to consumer welfare, particularly by ventures operating in multiple markets that do not readily fit into the conventional assessment of mutually exclusive vertical and horizontal “food chains.” In a broadband ecosystem where both technologies and markets converge, ventures can appear to offer consumers an incredible value proposition. Like economists’ determination that there is no such thing as a free lunch, a better calibrated, multi-dimensional analysis would identify significant offsetting harms to “free” Internet services like that offered by Facebook and Google. The paper concludes that recent and future acquisitions of broadband ventures have a much greater likelihood of generating legitimate concerns about competitive and consumer harms, particularly as markets become ever more concentrated, often dominated by a single firm. The paper does not recommend a repudiation of Chicago School antitrust doctrine, but recommends that reviewing agencies and courts calibrate empirical measures of prospective costs and benefits to consumers from a proposed merger by identifying short term and longer-term impacts on core and adjacent markets.

THE FAILING FIRM DEFENSE—AN EQUITY-BASED APPROACH

Abstract The failing firm defense is used to allow a seemingly anti-competitive merger, when one of the parties is a financially distressed firm. The basic argument is that harm to competition will ensue regardless of the merger, while allowing it provides a preferable alternative, maintaining commercial activity and protecting employment. The problem with the failing firm doctrine lies in antitrust enforcement agencies making highly uncertain predictions regarding future states of competition and broadening their discretion to encompass non-competition-related goals. As a result, enforcement agencies are pushed to extremes, succumbing to either type I errors (enjoining mergers that should have been approved) or type II errors (approving mergers that should have been blocked). Legal history suggests that regulators are excessively risk-averse, rarely accepting the failing firm defense. This paper offers a novel approach which minimizes the costs of both types of errors. We argue that rather than merely approve of, or forbid, the merger, antitrust agencies should also consider a third possibility: approval of the merger under the condition that the Government receive a passive equity stake in the merged entity in proportion to the actual post-merger decrease in market competition. The decrease in competition and the subsequent dilution of incumbent equity holders is to be decided ex post facto by comparing the change in an agreed-upon measure before and after the merger, preferably over several time intervals. This approach transforms the ex ante complex and uncertain regulatory decision to a rather simple ex post measurement problem. The proposed solution also deters firms from post-merger exploitation of market power, while allowing the public to be compensated for any harm to competition caused by the merger. All this, while reducing the costs of administrating the regulatory process. Finally, our approach also allows consideration of various stakeholders’ interests beyond direct consumers, that is, employees and creditors of the financially distressed firm, as well as economy-wide interests and the interest of the public at large.

Antitrust and Tech: Europe and the United States Differ, and It Matters

European enforcers have brought high-profile antitrust cases against the tech giants, and both activists and members of Congress are calling for action in the United States. This short note identifies ten hard-wired differences between the European and American enforcement regimes that make very it difficult for the US antitrust enforcement agencies to emulate their European counterparts. This note also identifies a few other points of contrast between Europe and the United States that affect antitrust enforcement against tech giants going forward.

Assessing Merger Impacts on Consumer Welfare in a Converging Internet Marketplace

This article identifies substantial flaws in how U.S. government agencies and courts assess merger proposals by ventures operating in the information, communications and entertainment (“ICE”) marketplace. Using current market definitions, consumer impact assessments and economic doctrine, antitrust enforcement agencies may fail to identify the risk of harm to consumers and competition, a so-called false negative. In recent years, the Department of Justice, Federal Communications Commission and Federal Trade Commission, individually and collectively, have assessed the competitive consequences of numerous multi-billion dollar acquisitions and have conditionally approved almost all of them. These agencies appear predisposed to favor deals that involve vertical integration up and down market segments, based on an assumption that short terms consumer welfare gains would exceed any potential competitive harms. The article concludes that reviewing government agencies appear to overemphasize past and current marketplace conditions rather than assess future impacts on consumers and competition. By “fighting the last war,” these agencies fail to identify new risks to consumer welfare, particularly by ventures operating in multiple markets that do not readily fit into the conventional assessment of mutually exclusive vertical and horizontal “food chains.” In an ecosystem where both technologies and markets converge, ventures can appear to offer consumers an incredible value proposition akin to a “free lunch.” A better calibrated, multi-dimensional analysis would identify significant offsetting harms. The article suggests that the narrow fixation on near term impact on consumers and the prices they pay insufficiently assesses the potential for harm, particularly for Internet-based ventures that require no cash payment for service. Government antitrust enforcement agencies compound mistakes in market impact assessment by ignoring how firms finance “free services” through often obscured collection, analysis and sale of consumer data. In light of increasing concentration in the ICE marketplace, through mergers and the impact of converging technologies, surviving ventures can adversely impact both core and now more closely integrated, adjacent markets. The article will examine how and why the FTC approved the acquisition of DoubleClick by Google in 2007, having concluded insignificant competitive harm will occur even as Google quickly grew to dominate nearly all sectors of the ICE advertising marketplace. The article also evaluates whether in conditionally approving Comcast’s acquisition of NBC/Universal the FCC failed to safeguard consumers. Additionally, the article considers whether AT&T, as anticipated by reviewing courts, flowed through to consumers any of the anticipated efficiency gains and cost savings generated by its acquisition of Time Warner. The article concludes that recent and future ICE acquisitions have a much greater likelihood of generating legitimate concerns about competitive and consumer harms, particularly as ICE market becomes ever more concentrated and often dominated by a single firm. The article does not recommend a repudiation of Chicago School antitrust doctrine, but recommends that reviewing agencies and courts calibrate empirical measures of prospective costs and benefits of a proposed merger by identifying short term and longer-term impacts on core and adjacent markets.

Taking it to the Limit: Shifting U.S. Antitrust Policy Toward Standards Development

In November 2017, U.S. Assistant Attorney General Makan Delrahim, chief of the Department of Justice (DOJ) Antitrust Division, gave a speech at University of Southern California provocatively entitled “Take it to the Limit: Respecting Innovation Incentives in the Application of Antitrust Law”. In this speech, Mr. Delrahim announced a new DOJ policy approach to the antitrust analysis of collaborative standard setting and standards-development organizations (SDOs) -- the trade associations and other groups in which industry participants cooperate to develop interoperability standards such as Wi-Fi, Bluetooth, 4G and 5G, USB and the like. He explained that the DOJ had “strayed too far” in its focus on single firm conduct concerning standards, particularly the assertion of patents essential to the implementation of standards in technology products (“standards-essential patents” or “SEPs”), and that antitrust authorities should be more concerned with potential collusion by competitors within SDOs (i.e., an apparent shift in doctrinal focus from unilateral conduct under Section 2 of the Sherman Act to concerted action under Section 1 of the Sherman Act). One commentator described the DOJ policy shift announced by Mr. Delrahim as “a 180 degree turn” on SEP issues. The new policy also seems to put the enforcement priorities of the Antitrust Division at odds with those of the other principal U.S. antitrust enforcement agency, the Federal Trade Commission (FTC) and jeopardizes reliance of a long line of DOJ Business Review Letters outlining acceptable approaches to conduct such as forming patent pools. This article analyzes the contours of the emerging divide among U.S. antitrust agencies, as well as reactions to the “Take it to the Limit Speech” by industry, academics and Mr. Delrahim’s subsequent public statements.

Evaluation and Analysis of Antitrust Enforcement in the API Industry in China

At present, monopolistic acts are frequent in the active pharmaceutical ingredient (API) industry, which exerts a serious impact on the normal functioning of the API market and pharmaceutical market. This industry is closely bound up with numerous patients and is a major livelihood issue. Antitrust enforcement agencies have investigated seven API antitrust cases. Based on these seven cases, this article will compare the similarities and differences between the National Development and Reform Commission and the Administration for Industry & Commerce (AIC) in law enforcement approaches and analyze the advantages and defects of antitrust enforcement in the API industry in China.

Making Health Care Markets Work: Competition Policy for Health Care

The U.S. health care system does not work as well as it could, or should. Prices are high and vary in seemingly incoherent ways, yet quality of care is uneven, and the system lacks the innovation and dynamism that characterizes much of the rest of our economy. The dearth of competition in our health care markets is a key reason for this dysfunction. There is a growing understanding that comprehensive efforts to control health care costs and improve the quality of care must address the functioning of the markets that undergird the health care system and the prices paid to providers. Ensuring that markets function efficiently is central to an effective health system that provides high quality, accessible, and affordable care. A large body of evidence shows that patients, employers, and private insurers pay more for health care in highly consolidated provider markets — for instance, where only one or two hospital systems exist. Higher health care costs lead to higher premiums, making insurance more expensive and less affordable. Even in public programs, such as Medicare, a lack of competition among providers is associated with lower quality care. The same is true of health insurance — it has been extensively documented that less competition leads to higher premiums. Each of us has been concerned about competition for quite some time. Earlier this fall, we convened a meeting supported by the Robert Wood Johnson Foundation, and co-sponsored by the American Enterprise Institute, the Brookings Institution, and Carnegie Mellon’s Heinz College, to formulate ideas for actionable policies that public and private stakeholders can implement to improve the functioning of health care markets. Approximately 40 academics, industry stakeholders, and federal and state government officials participated in the meeting, which produced focused, practical proposals. This white paper reflects the authors’ recommendations, taking the discussion at the meeting into account, without any attempt either to summarize the meeting or to associate the participants with these views. We propose a new “competition policy” for health care that involves multiple actors at the federal and the state level: the White House and state governors, federal and state executive agencies, and federal and state legislatures, as well as the federal and state antitrust enforcement agencies traditionally focused on competition. Inattention to the impact of policies on consolidation may have unwittingly put the U.S. on a path to less competition in health care markets; addressing it will require broader action and attention beyond antitrust enforcement as well. Pursuing this agenda will allow health care markets to function more efficiently, leading to higher quality, more accessible, and lower-cost care. We focus on policies to enable and support competition by health care organizations. We propose specific, actionable policies to maintain and enhance the competitiveness of health care markets, promote entry by new competitors and remove barriers to entry, and prevent anticompetitive practices. We think these policies can have an immediate and meaningful impact. We note that these are non-partisan policies that can elicit support from across the political spectrum.

Why SEPs have been involved in Antitrust Cases – From A Chinese Scholar’s Perspective

Abstract If patents have been included in a technical standard and thus have become standard essential patents (SEPs), the SEP holders normally have to commit to the Standard Setting Organization (SSO) to license their SEPs on fair, reasonable and non-discriminatory (FRAND) terms. Although the FRAND commitments already put constraints on the patentees, more and more disputes over FRAND licensing fees involving SEPs are reaching antitrust enforcement agencies and courts, perhaps due to the fact that the FRAND commitments are often not workable. As demonstrated in the case Huawei v. IDC in Chinese courts, SEPs have special characteristics compared to non-SEPs, i.e. the licensing of SEPs relates more to the public interest, the holders of the SEPs may be thought to have dominant positions in the licensing market of their SEPs, the holder of the SEPs often have made commitments to license on the FRAND terms, and the holder of the SEPs should be allowed to use the injunctive relief only in limited circumstances. This article also proposes that Article 55 of the Chinese Antimonopoly Law (AML) should be reconsidered because it exempts the undertakings who exercise their IPRs in accordance with the laws and administrative regulations on IPRs from the application of the AML. However, as this article shows, the excessive royalty requested or the injunction sought by the holder of SEPs may not violate the patent law, but nonetheless may violate the antitrust law.

Revising the US vertical merger guidelines: policy issues and an interim guide for practitioners

While the Horizontal Merger Guidelines issued by US antitrust enforcement agencies have been periodically revised since their first publication in 1968, the Vertical Merger Guidelines were last the subject of modification in 1984. Moreover, there appears to be little appetite within the agencies for revision; so interested parties are for the moment left with guidance which does not reflect contemporary economic theory, agency practice or the 2010 Horizontal Merger Guidelines. The aim of this article is to partially fill the gap left by this divergence, by providing both a modern analytical framework for the assessment of vertical mergers and illustrative examples of recent antitrust agency enforcement actions upon which practitioners and agency staff alike may rely. The article also identifies a number of legal and policy issues which would need to be considered were the Vertical Merger Guidelines to be revised. We hope that this article will facilitate a more rapid revision.