Tuesday, February 1, 2011
Posted by D. Daniel Sokol
Lorenzo Coppi (LECG) asks Google, IBM, SAP, and The Others: Is the European Commission Targeting Technology Firms?
ABSTRACT: The European Commission has recently opened an antitrust investigation in connection to Google's commercial practices. This is just the last of a number of recent investigations in the high-tech sector, which have involved Microsoft, Intel, IBM, Qualcomm, Rambus, Apple, and SAP. After reviewing the scope of the European Commission's investigation of Google (on the basis of the available public information), this article focuses on the question of whether there are characteristics of the high tech sector which make it particularly prone to monopolization or anticompetitive foreclosure, and which justify the European Commission's apparent focus on the sector. First the article discusses the reasons militating in favor of close scrutiny of the technology sector, namely the tendency of high tech markets to be significantly concentrated, and the fact that high tech products tend to have significant complementarity and interoperability relationships which make exclusion of competitors a tangible possibility. Then the article reviews the argument against close scrutiny of the technology sector, namely the fact that it is characterized by dynamic, fast-changing, platform competition, and that the legitimate by-product of innovative behavior is a transitory monopoly, the curbing of which may chill innovation incentives. The article concludes that, on balance, high tech markets are a reasonable target for antitrust scrutiny because they have a propensity to "tip to monopoly;" exclusion of competitors is fairly easy and often profitable; the effects of market power on incentives to innovate are uncertain; and the sector is very important to the economy. Obviously this does not mean that all the cases the European Commission is investigating have merit-only time will tell if that is the case.