Remedies for Monopolization

Slide 1

Remedies for Monopolization

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

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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

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

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?

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

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

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"