Friday, January 8, 2010
Posted by Geoff Manne
The FTC should be ashamed
Seriously. What interpretation of events is there other than that the FTC knew it could not prevail in a Section 2 case and decided to go in search of a back-up? Commissioners Rosch and Leibowitz have been making noise about Section 5 for some time, and this seemed like the perfect opportunity to put it to the test—to make some new law that would favor the Commission in cases like this one where it “knows” there is injury but the Section 2 case law makes prevailing difficult nonetheless. They have “found” their case, and Intel, its shareholders, consumers and competition generally will suffer mightily for their hubris.
Chairman Leibowitz’ defense of the use of Section 5 is, quite frankly, astonishingly disingenuous. First is the implicit defense I mention above—“hey, we can’t win under settled law [I guess repudiating the Section 2 Report just wasn’t enough. Bummer.-ed.] so let’s make some new law. We are doing good after all, and if the law stands in our way, we should find a way around.” Commissioner Rosch has made similar noises in the past. I find this degree of hubris to be appalling and dangerous.
Second is the remarkable claim that Section 2 is a problem only because courts have taken its teeth away only because of abusive private litigation process—and the FTC is not susceptible to those process problems, so an emasculated Section 2 should not constrain the FTC. There is so much wrong with this. Section 2 jurisprudence and a concern for error costs is about substantive error as well as procedural imbalance; I’d even say it is more about the former. Read any Section 2 case and the entirety of the decision (Microsoft, for example) is about how, as a matter of substance, we can be sure we’re getting it right in assessing speculative harms. Of course there is a background procedural element that tips or rights the scales, but the claim that this is entirely what Section 2 jurisprudence is about is ridiculous on its face. For the FTC to claim that it should not be bound by the substantive, economically-sensible limits of antitrust that courts have developed in their jurisprudence is for the FTC to claim that it is simply above the law—and the economics. And I would be interested in seeing any case-law precedent for the claim that Section 2 jurisprudence is all about reining in private litigation and not about getting the economics right.
We’ve seen this kind of hubris before—when antitrust enforcers have pursued tenuous and costly cases despite massive uncertainty and copious conflicting evidence: IBM and Microsoft come to mind. I still relish Larry Lessig’s admission that he “blew it on Microsoft” because he couldn’t anticipate the future—a future that Microsoft told him and the court was inevitable and coming quickly. Now we have Commissioner Rosch’s essentially-unmoored reading of Section 5 to support another speculative case—this time one almost certain otherwise to fail under the current law. It is a disaster in the making not only for Intel but for the economy generally if the Rosch/Leibowitz reading of and approach to Section 5 takes off.