Wednesday, October 20, 2004

Hovenkamp on regulation and antitrust

Anyone interested in the intersection of antitrust and regulation (whether telecommunications, IP, or environmental) should read Herbert Hovenkamp's article "Antitrust and the Regulatory Enterprise," published at 2004 Columbia Business Law Review 335 (2004). Professor Hovenkamp addresses several issues I would like to touch on through my posts here and is directly on point to Monday's post on Trinko.

First of all, Professor Hovenkamp makes the often ignored point that intellectual property is a form of regulation:

"[W]hile extreme free marketers might rail at the excesses of regulation or antitrust, they tend to accept the system of intellectual property ("IP") rights as if it were handed from a mountaintop. In fact, however, the existing IP system is a very elaborate effort to correct a market failure, in this case free riding that occurs when innovations are too freely copied, and the corresponding decrease in the incentive to innovate. Anyone who does not believe that the IP laws are a form of regulation has not read the Patent, Lanham, or Copyright Acts and the maze of technical rules promulgated under them. To be sure, IP laws create property rights. But so do state created exclusive franchises and filed tariffs. In fact, the detailed regulatory regimes that we call the IP laws are filled with very rough guesses about the optimal scope of protection-- ranging from the duration of patents and copyrights to the scope of patent claims and fair use of copyrighted material."

Second, the article, after presenting a thorough and engaging discussion of the history of regulation in the US, presented with wide-ranging examples, discusses Trinko. Professor Hovenkamp, as I read him, agrees with the opinion as deferring to Congressional regulation (or deregulation, perhaps more appropriately) of the telecommunications market. He writes, "Trinko illustrates why some kind of immunity doctrine can be helpful, even in a partially deregulated industry. Here, a government agency was intended by Congress to resolve interconnection disputes and it was actually doing that job far more expeditiously than any court could do it through jury trials." But he also cautions against finding a blanket immunity from antitrust within telecommunications law:

"Considered in this light, the most sensible reading of the 1996 Act's Saving Clause is that it preserves intact the system of regulatory rules that existed prior to the consent decree and that continues to govern most regulated industries. Under these rules there is no blanket immunity from the antitrust laws. Further, behavior that is never disclosed to the agency, perhaps because it is surreptitious, is not immune. However, immunity is given for conduct that is within the jurisdiction of a regulatory agency and where the agency has acted or is actively considering whether to act."

Professor Hovenkamp's article makes sensible and insightful points about antitrust in the regulatory state. The open question is how do we implement the complementary visions of the marketplace that are at the heart of antitrust and specific regulatory schemes (whether telecommunciations, IP, or environmental law). In practice, it seems that what is in theory complementary, may in practice require reconciling contradictory visions, espcially when Congress had been slow in implementing its vision of the marketplace or has been subject to capture (as has been the case with intellectual property law).

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