Michael Katz ‘Platform economics and antitrust enforcement: A little knowledge is a dangerous thing’ (2019) Journal of Economics and Management Strategy 28 138

This article, available here, argues that, while the economics of multisided platforms have led to important insights for antitrust policy, academic knowledge falls short of providing useful advice to enforcement agencies and courts on a number of critical topics. The author identifies several areas in which economics research could potentially make significant contributions to the practical antitrust treatment of platforms. The paper is structured as follows: Section 2 discusses various economic definitions of platforms. When should a firm be defined as a multisided platform? As has been widely noted among academics, there is a lack of consensus regarding the definition of a multisided platform. For purposes of antitrust economics, a fruitful way to rephrase the question is to ask: under what conditions is it important to account for cross‐platform interactions to ensure an accurate understanding of industry equilibrium, and when is it meaningful to examine just one side of a firm’s operations? The paper reviews a number of definitions that have been…

Patrick Todd ‘Intra-platform exclusion in software markets’ (2018) Journal of Antitrust Enforcement 6 409

This article, available here, analyses situations where platform operators design their platforms in a way that is liable to exclude intra-platform competitors. Exclusion in intra-platform markets require certain intricacies that existing theories of harm in antitrust law do not anticipate; thus, applying those theories unyieldingly is liable to cause confusion and result in judicial error. Authorities must formulate policies that detect anticompetitive exclusion without deterring innovation, and apply that policy consistently across comparable cases. Existing cases reveal that some authorities and courts have been taking a sensible approach to intra-platform exclusion, whereas others, especially in the EU, have shown a tendency to protect excluded intra-platform firms at the expense of consumer welfare. The paper is structured as follows: Section II defines software platforms and describes platform owners’ relationships with third-parties that distribute services through their platforms. Software platforms are code-based infrastructures that facilitate exchanges and transactions through the creation of one or multiple downstream ‘intra-platform’ markets. Through a platform, users can transact with…

Jonathan Baker and Fiona Scott Morton on ‘Antitrust Enforcement against Platform MFNs’ (2018) Yale Law Journal 127 2176

 . This paper, available here, argues for more vigorous antitrust enforcement against Most Favoured Nation (MFN) provisions in the platform context. A MFN clause requires providers to refrain from offering their products or services at lower prices on other platforms. During the past two decades, antitrust enforcement against MFN provisions has grown, particularly in Europe. In contrast, there have been almost no enforcement actions against platform MFNs in the United States. The authors make a number of proposals to reverse this trend. The article is structured as follows: Part I shows how platform MFNs can harm competition and consumers, despite their potential competitive benefits. The authors’ draw on the economics’ literature on the effects of MFNs generally, and platform MFNs in particular. Simple MFNs commit sellers not to discount selectively, which assures covered buyers that they will be charged the lowest price offered by the seller. At first blush, one might expect this provision to lead to lower prices for covered buyers….

Reuben Binns and Elettra Bietti ‘Acquisitions in the Third-Party Tracking Industry’

This working paper, which can be found here , draws attention to one particularly complicated kind of digital data intensive industry: third party tracking, in which a firm does not (only or primarily) collect and process personal data of its own customers or users, but focuses instead on collecting data of users of other ‘first party’ services. The authors focus on mergers and acquisitions of third-party tracking firms because they raise some unique challenges which are often missed in regulatory decisions and academic discussions of data and market concentration. The paper is structured as follows: Section 1 contains a brief overview of the technical elements of third party tracking and of the business practices associated with it. This description is somewhat long because it provides a good overview of these business practices; you may want to skip it if you are familiar with them. ‘Tracking’ refers to a range of data collection and processing practices which aim to collate the behaviours…

Michael Katz and Jonathan Sallet ‘Multisided Platforms and Antitrust Enforcement’ (2018) Yale Law Journal 2142

This paper,  available here, looks at two questions regarding competition enforcement in platform markets: (i) how should one account for the distinct characteristics of platforms when defining an antitrust market; and (ii) how, if at all, should one weigh user groups’ gains and losses on different sides of a platform against one another. In short, the authors argue that enforcers and courts should use a multiple-markets approach to multisided platforms, in which different groups of users on different sides of a platform belong in different product markets. This approach allows one to account for cross-market network effects without collapsing all platform users into a single product market. They further argue that enforcers should consider the price structure of a platform, and not simply its net price, when assessing competitive effects. This justifies the use of a separate-effects analysis, according to which anticompetitive conduct harming users on one side of a platform cannot be justified just because that harm funds benefits for users…

Gregory J. Werden and Luke M. Froeb ‘Why Patent Hold-Up Does Not Violate Antitrust Law’ (forthcoming, Texas Intellectual Property Law Journal)

As the title indicates, this paper argues that patent hold-up, as courts and commentators define the term, does not undermine the competitive process and thus cannot give rise to a valid antitrust claim, at least in the US. The paper is available here and is structured as follows: Part II describes patent hold-up and sets out the economic framework employed by many antitrust intervention advocates. A relatively recent phenomenon is that important standards are encumbered by many—perhaps thousands—of Standard Essential Patents (SEPs). “Inventors” own SEPs and grant licences to them, while “implementers” manufacture or sell standard-compliant components or devices. Antitrust intervention advocates argue that these sunk costs permit inventors to engage in “opportunism” by demanding royalties that could “capture part of the fruits of another’s investment,” i.e., part of the sunk investment of implementers. This “opportunistic” behaviour by inventors is what generally is meant by the term “patent hold-up.” Out of a conviction that inventor opportunism is a serious problem, advocates of…

Jorge Contreras ‘Much Ado about Hold-Up’

This paper criticises the longstanding debate about patent holdup – and particularly about whether it is a systemic issue. In short, the paper argues that the ongoing hunt for empirical evidence of systemic patent hold-up in standardised product markets, or lack thereof, is a fruitless academic exercise. The paper can be found here and is structured as follows: Part I offers some essential background on standard setting and standards-essential patents. As I am sure we are now all fed up with this, I will skip it. Part II explores the interrelated questions that form the core of the current hold-up debate: how is hold-up defined, and what can empirical evidence tell us about hold-up in today’s technology-driven markets? The notion of economic hold-up originated with Oliver Williamson’s leading work on transaction costs and information asymmetry in the 1980s. The owners of specific assets are vulnerable to opportunistic behaviour by potential transaction partners who act dishonestly (e.g., by using deceptive means to…

Noel Maurer and Stephen Haber ‘An Empirical Analysis of the Patent Troll Hypothesis: Evidence from Publicly-Traded Firms’ (2018) Hoover Institution Working Paper no. 17003

Do firms that earn revenues from licensing their patent portfolios, rather than producing physical products – often referred to as patent assertion entities (PAEs) or, more disparagingly as ‘patent trolls’ – frustrate or facilitate innovation? According to one view, PAEs purchase specious intellectual property and then file frivolous lawsuits in order to extort revenues from operating companies that would rather settle than go through the expense of litigation. The revenues earned by PAEs are therefore a tax on innovation: dollars that would be spent on R&D by operating companies are diverted to non-productive uses. A business model based on using low value patents to file frivolous lawsuits for their nuisance value, with little risk of being countersued, should yield easy returns—and a high yield, low risk business model that is not characterized by barriers to entry should proliferate rapidly. It follows, accordingly, that PAEs are a systemic threat to innovation, economic growth, and consumer welfare, and thus the laws governing…

Jorge Padilla, Douglas H. Ginsburg and Koren W. Wong-Ervin ‘Antitrust Analysis Involving Intellectual Property and Standards: Implications from Economics’ (forthcoming, George Mason Law Review)

The paper, which can be found here, provides an overview of the economics of innovation and IP protection, licensing, and compulsory licensing, with specific applications to standards development and standard-essential patents. The authors also propose principles based on their economic analysis that courts and antitrust agencies can apply at each stage of an antitrust inquiry. The paper concludes with a summary of the approach to IP applied in China, the European Union, India, Japan, Korea, and the United States. The paper covers a lot of ground (and is quite long). I will try to summarise the argument as much as possible, but, to make it easier to read, I will also attempt to flag the specific topics addressed at each point, so that you may focus on those matters of greater interest to you. The paper is structured as follows: Section II summarises the relevant economic literature. While consumers gain from increases in static efficiency in the short run, economics teaches us…

Harry First ‘Excessive Drug Pricing as an Antitrust Violation’ (forthcoming on the Antitrust Law Journal)

In the US, there have been antitrust enforcement efforts against various pharmaceutical practices that elevate price above the competitive level, such as reverse payments (or pay-for-delay), product hopping, and collusion among generic drug manufacturers. However, the conventional wisdom is that U.S. antitrust laws do not forbid high prices simpliciter. This paper argues that the conventional wisdom may be mistaken: Section 1 engages in a general discussion of the problem of high prices and provides two examples of a non-antitrust approach to this problem. The standard antitrust/welfare economics paradigm condemns high prices at least on the grounds of resource misallocation and deadweight welfare loss. Many scholars go beyond deadweight welfare loss concerns, condemning monopoly pricing because of the redistribution of the consumer surplus from consumers to producers, but some are indifferent to this redistribution. There is an additional argument that can be made against high prices, but it is one to which antitrust is often indifferent: high prices can be seen…