Joint FTC-DoJ Hearings On Section 2 Of The Sherman Act
Slide 1
Joint FTC-DoJ Hearings
on Section 2 of the Sherman Act
Testimony of Patrick M. Sheller
Chief Compliance Officer
Eastman Kodak Company
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February 13, 2007
Slide 2
Kodak and Section 2 of the Sherman Act
Slide 3
Kodak Business Model Evolution
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Focus on Consumables Cameras + Film, Paper & Chemicals |
Hardware + Service Copiers/Micrographics units + Aftermarket Service |
Solution Sales Printers + Media/Ink + Sensors + Software + Professional Services + Aftermarket Service |
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1880s-1970s 1970s-1990s 2000s-?
Slide 4
Critical Success Factors to Digital Model
Speed of innovation and technology development
Cross licensing of intellectual property
Ability to sell solutions
Slide 5
Potential Section 2 Impediments
Delayed recognition of market changes
Line between tying and bundling has blurred
- LePagesv. 3M
Obstacles to IP protection and licensing
- ITS v. Kodak (9thCircuit)
- European Commission precedent
- Compulsory licensing
Slide 6
Uncertainty in the Wake of LePages
Above cost bundled discounts can be exclusionary under Section 2
- BrookeGroup does not apply
- Exclusionary effect = harm to "one significant competitor"
Clearly permissible discounting practices?
- Single product volume discounts
At risk:
- Discounts linking products across multiple markets
- Discounts linking products within a single line
- E.g. branded and private label tape
No Coherent Standard to Evaluate Bundled Pricing
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Slide 7
Alternative Approaches to Bundling
Concord Boat (8thCircuit)
- Above cost single-product discounts are not exclusionary (apply Brooke Group)
Ortho Diagnostic Systems (S.D.N.Y.)
- Could an equally efficient competitor to the monopolist profitably match its bundled discounts?
To prohibit above-cost discounting creates intolerable
risks of chilling legitimate price-cutting.Brooke Group |
Slide 8
Split Among the Circuits on IP Rights
9thCircuit in ITS v. Kodak (1997)
- Presumptively valid business justification for refusing to license/sell IP rights can be rebutted by evidence that justification was a pretext for anticompetitive motives
Federal Circuit in Xerox v. CSU(2001)
- Absent tying, fraud or sham litigation, "we will not inquire into the patentee's motivations for asserting his statutory right to exclude."
- Same rationale extended to refusals to license copyright protected works
Slide 9
Impact of Section 2 Uncertainty on Digital Model
Uncertainty and risk:
Hypothetical Transactions |
Photo Kiosks |
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Digital Camera IP |
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On-line Photo Service |
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Graphics Solution |
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Slide 10
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