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Thursday, January 7, 2010

Section 5 FTC Act Blog Symposium: Comments of Bob Lande

Posted by Bob Lande

Much of the FTC’s complaint against Intel mirrors the charges in cases filed by the European Commission and others.  Because I have shown elsewhere why this conduct is anticompetitive (see, for example, “The Price of Abuse: Intel and the European Commission Decision” GCP: The Online Magazine for Global Competition Policy, No. 2, June 2009, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1434985 ) I will not repeat this explanation.  This Intel conduct should be found to violate Section 2 of the Sherman Act and should be heavily sanctioned.

If all the FTC had done was to echo these CPU chip lawsuits, its filing would have been in the public interest, but not earth shattering.  The Commission, however, added significant issues to the mix. First, it alleged similar exclusionary conduct involving another important relevant chip market, the market for graphic processing chips.  Second, other counts charged fundamentally different types of anticompetitive conduct that might only have violated Section 5 of the FTC Act (paragraph 97 of the FTC’s Complaint).  For this type of conduct the FTC apparently did not want to subject Intel to the nearly automatic private treble damage liability that would follow from a FTC finding that Intel violated the Sherman Act.  Alternatively, the FTC might not have believed a Sherman Act violation would be called for or sustained by reviewing courts.

For example, the FTC charged Intel with blocking or preventing innovation in the relevant markets (see, for example, paragraphs 94 b and g).  I am not aware of any case holding that this type of conduct, by itself, violates the Sherman Act.  Regardless, this conduct should be a Section 5 violation even if it does not rise to the level of a Sherman Act violation (with all  the market power, etc, elements that a Sherman Act violation would require).  Any non-deminimus blocking or preventing of a reasonable chance of innovation should violate Section 5, even if these actions had not at the time risen to the level where they helped Intel monopolize or maintain a monopoly in a relevant market.  This type of allegation is ready-made for Section 5 scrutiny, and the Commission might well believe that if it decided this conduct violated Section 2, with the private damages exposure that arises from a Sherman Act violation, a reviewing court might not sustain a violation.  

In addition, the FTC pled a pure consumer protection theory (paragraph 103).  This suggests the agency has (correctly) decided it is comfortable with the idea that a corporation can be a “consumer,”  and that the role of the agency is to protect choice and free market transactions for all “consumers”.  These alleged consumer protection violations are another example of conduct that the FTC might well believe should fall under Section 5, but not under Section 2. (This is in addition to the Commission’s idea that deception can help monopolize a market, a hybrid of consumer protection and competition law. Intel allegedly used deception to slow the market’s adoption of rivals' products as a monopolization technique.)

It was quite logical for the FTC to keep its options open by pleading both pure Section 5 violations and also violations of Section 2 of the Sherman Act.  In this way the Complaint  keeps the Commission’s options open and flexible.  The FTC ultimately can choose to use whatever mix of Section 2 and Section 5 theories the developing facts suggest.

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