This document is available in three formats: this web page (for browsing content), PDF (comparable to original document formatting), and PowerPoint. To view the PDF you will need Acrobat Reader, which may be downloaded from the Adobe site. For an official signed copy, please contact the Antitrust Documents Group.

Slide 1

LATHAM & WATKINS LLP

Remedies for Monopolization

Tad Lipsky
Washington, D.C.
March 28, 2007

Latham & Watkins operates as a limited liability partnership worldwide with an affiliate in the United Kingdom and Italy, where the practice is conducted through an affiliated multinational partnership ©Copyright 2007 Latham & Watkins. All Rights Reserved.


Slide 2

Essential Facilities and Mandatory Access

No Sense Pretending

  • If the “essential facility” and “inability to duplicate” elements of the EFD are met, a classic declining-cost situation is likely presented

  • The viability of any and every regulatory alternative becomes debatable – including “do nothing”

  • Likely EFD flaw – lack of capacity could be marker for benefits of intervention

  • Essential IP – where “inability to duplicate” is imposed by IP law, antitrust intervention is in tension with reward rationale

LATHAM & WATKINS LLP


Slide 3

Essential Facilities and Mandatory Access

Access Remedies – Costs and Complications

  • Complexities of access pricing
      Concepts and measurements debatable – return, cost, etc.

  • Endless evasion possibilities
      Reluctance to build capacity and make it available
      Reluctance to offer and transact
      Reluctance to install, repair, etc.

  • Sacrifices economies of integration

  • Specific problems of administration through judicial/executive consent-decree enforcement

  • Strategic behavior – litigate rather than innovate

LATHAM & WATKINS LLP


Slide 4

Essential Facilities and Access Remedies

Nevertheless . . .
Mandatory access has benefits and deserves consideration

  • Can access be dealt with through an established regulatory mechanism?
      United States v. Terminal Railroad (1911) (ICC)
      United States v. AT&T (1982) (FCC)
      But see United States v. Otter Tail Power (1973) (FPC lacked authority to impose access obligation at the time)

  • Is access already defined by commercial practice?
      Gamco v. Providence Fruit & Produce Building (1952)
      United States v. Associated Press (1945)

  • Are there likely dynamic efficiencies?
      United States v. AT&T – necessary for mobile/IP/broadband?

LATHAM & WATKINS LLP


Slide 5

Institutional Aspects of Antitrust Remedies

The Need for Speed

  • Identified sound goals are essential to success
      United States v. IBM Corp.
        Expanding/shifting theories and questionable procedural approach doomed possibility of much narrower but quickly successful case

      United States v. Microsoft Corp.
        Per-processor license phase: complaint to decree in one year (not counting FTC phase) – provides flexibility and minimizes error cost
        Broader “platform software” phase: lessons complicated by shifts in theory/remedy fit and procedural developments

      United States v. Western Electric Co./AT&T Co.

        Theories shifted from long-lines to equipment to local monopoly
        Ultimately, coherent approach suggested workable remedy

LATHAM & WATKINS LLP


Slide 6

Institutional Aspects of Antitrust Remedies

  • Legislative Role
    A perennial challenge where economic regulation is concerned

  • Administrative Regulation Role
    Reflection of the legislative challenge – unclear mandate means incoherent regulation

  • Executive Role
    Traditionally somewhat better directed in terms of policy coherence
    Not immune from distractions and other agendas

  • Judicial Role
    Capacity for targeted change under specific conditions
    Not immune from weaknesses of administrative regulation, distractions and other agendas

LATHAM & WATKINS LLP


Slide 7

Conclusions

Successful antitrust case must have three characteristics

  • Legally sound

  • Based on sound economics

  • Identifiable remedy that is both capable of effective administration and likely to improve consumer welfare

Identifying good candidates for structural cases

  • Importance

  • Long-term performance issues

  • Balanced assessment of policy alternatives – do nothing, apply antitrust, “other”
LATHAM & WATKINS LLP