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Remedies For Monopolization

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Slide 1


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


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


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”
Updated June 25, 2015

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