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Friday, January 8, 2010

Section 5 FTC Act Blog Symposium: Comments of Sean Heather

Posted by Sean Heather

Expanding Antitrust Doctrine?

The Chamber authored its views on the use of Section 5 in an article last September. In it we examined the past use of Section 5, acknowledged the courts acceptance of the FTC’s broad authority under the law, but also took note that the courts have consistently found fault with the FTC enforcement under Section 5 citing in many cases a lack of evidence and for failing to define the improper conduct according to acceptable criteria.  We concluded that the FTC’s use of Section 5 should not be an antitrust enforcement “catch all” and should not be used as a means of extending antitrust doctrine without clear guidelines articulated in advance.  

What does this mean for the Intel case?  And, if Intel has engaged in anticompetitive conduct, as the FTC alleges, why isn’t this a Section 2 case?

The U.S. Bureau of Labor Statistics has shown that the price of microprocessors has fallen more rapidly than any of its other 1200 tracked segments, and the pace of innovation and therefore the speed of microprocessors have undeniably improved at a staggering rate. The FTC, however, argues that prices would have fallen further faster, while at the same time outpacing the innovative advances achieved in the last decade. 

As a Section 2 case such an argument is hard for the FTC to prove, but as a Section 5 case it becomes hard to defend oneself against. Commissioner Rosch’s statement in the case spells this out explicitly as he explains the rationale for using Section 5 because he believes the real harm to consumers is simply the mere lack of choice, and does not rely on an increase in price.  Such a statement marks a significant departure from a reliance on rigorous economic analysis and empirical evidence to support enforcement findings.

Exploratory antitrust exercises are exactly what U.S. authorities have advised other countries against pursuing for decades. Now we seem to have forgotten our own advice.  In addition, the FTC case represents a potential government directed infringement on IP. The use of antitrust enforcement with forfeiture of IP rights as a remedy is what we have worried about in foreign jurisdictions, but the FTC’s complaint proposes such a remedy here at home.

If Intel has engaged in abusive conduct then the FTC should bring a Section 2 case.  However, doing so translates into a higher burden of proof standard, one in which the FTC looks to avoid by making this a Section 5 case and taking advantage of its overly wide interpretation of its authority.  In doing so, the United States is sending mixed signals internationally and undermining IP rights abroad.

Business above all requires transparent, predictable, and relatively stable antitrust enforcement. If the FTC wants to use Section 5 as a means of enforcement in expanded ways it should not be done after clear guidelines have been establishment and well in advance of any enforcement actions.  

http://lawprofessors.typepad.com/antitrustprof_blog/2010/01/section-5-ftc-act-blog-symposium-comments-of-sean-heather.html

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