Review of Abuse of Dominance in theTechnology Sector

Robert BellJacob A. Kramer

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Speakers

Robert Bell is head of the EU & UK competition team at Bryan Cave with over 20 years of experienceadvising on complex competition and regulatory matters involving some of the leading cases beforeThe Competition and Markets Authority, the European Commission and UK and European Courts.

He advises clients on a range of competition law issues including merger control, cartels, restrictivepractices, competition litigation and public procurement law.

Bell has a particular sector specialism in advising international technology and media clients on theapplication of competition law and new media, telecommunications regulation, and on competitionlitigation.

He is currently Chair of the City of London Law Society's Competition Law Committee, which liaiseswith the UK Government and the EU & UK competition regulators in connection with the reform ofcompetition law and practice.

Bell is recognised as one of London’s leading lawyers by The Legal 500 UK 2015, Chambers UK2015 and Chambers Europe 2015.

Contact: robert.bell@bryancave.com

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Speakers

Jacob Kramer’s trial and appellate litigation practice focuses on antitrust matters andcomplex commercial disputes.

Mr. Kramer’s antitrust litigation experience includes the defense of price-fixing,monopolization, tying, and conspiracy claims. He has worked on all phases of antitrustlitigation and has substantial experience presenting antitrust matters to both judges andjurors. In particular, Mr. Kramer has worked extensively with aftermarket issues, which oftenarise in disputes between manufacturers and distributors or independent serviceorganizations. Mr. Kramer also provides counseling to clients on a broad array of antitrustissues, including advice related to distribution networks and aftermarket strategies.

In the area of commercial litigation, Mr. Kramer has successfully litigated complexcommercial disputes in jury trials, appeals, and other proceedings, including cases involvingcontract, employment, civil rights, and intellectual property claims. Mr. Kramer also hasextensive experience with alternative dispute resolution, including through mediation andarbitration.

Contact: jacob.kramer@bryancave.com

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Agenda

1. Introduction to US antitrust rules

2. Introduction to EU competition rules

3. US enforcement in the technology sector

4. EU enforcement in the technology sector

5. Conclusions

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US Antitrust Prohibitions

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Sherman Antitrust Act (1890)

Section 1: Agreements that imposeunreasonable restraints on trade areillegal

Section 2: Monopolization, attemptedmonopolization, and conspiracies tomonopolize are unlawful

Clayton Antitrust Act (1914)

Allows private parties to enforce theSherman Act in civil suits for trebledamages, injunctions, and attorneys’fees

EU Competition Rules

– Article 101 TFEU which prohibits restrictive agreements

– Article 102 TFEU which prohibits the abuse of a dominantposition

– Appreciable effect on trade in the EU

– EU or national Member State jurisdiction

– Sanction (fines, unenforceability, private enforcement anddamages)

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US Developments

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Regulation of Technology Sector

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• US antitrust laws are enforced by the Department of Justice (“DOJ”) and theFederal Trade Commission (“FTC”)

• Agencies recognize common features of technology markets:

• Rapid innovation – new products and technology enhance competition,reduce costs/prices, and result in dynamic changes and “leapfrog”technology; market power can be transient

• High fixed costs and low marginal costs – high-risk, costly investments inR&D are needed on the front-end, but distribution can be inexpensive

• Intellectual property and interoperability are critical

• Potential for network effects – more users may increase value, up to a“tipping point” that results in a “winner take all” outcome

Enforcement Priorities - Innovation

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• Main Priority: Protect Innovation

• Over-enforcement could harm innovation

• 75% of economic growth since WW2 results from technological change

• Fact-intensive analysis of impact on innovation – very difficult to model

• Red Flags:

• Efforts to frustrate adoption of competing platform or next-generationtechnology (e.g., Microsoft and Netscape)

• Transactions that involve acquisition of an innovative or disruptivecompetitor or otherwise stifle innovation

Enforcement Priorities - Innovation

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• Examples of modified transactions:

• 2011 – Comcast/NBC Universal – parties agree to divest managementrights in Hulu and to license NBC content post-acquisition

• 2011 – Google/ITA Software – Google commits to continue developingflight search software after acquisition

• Examples of blocked transactions:

• 2010 – H&R Block/Tax Act – proposed acquisition of “maverick”competitor known for disruptive tactics and aggressive pricing

• 2011 – AT&T/T-Mobile – proposed acquisition of smallest of four majorcarriers, which had survived through innovation (e.g., Android and WiFi)

Other Enforcement Priorities

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• Protect Price Competition – often related to protecting innovation

• Prevent Unlawful Collusion - per se antitrust violations are always a priority

• Apple eBooks – DOJ obtains injunction and compliance monitor

• Two technology companies among corporations fined more than $10million for Sherman Act violations since 1995:

• LCD cartel fines: $14 billion total (2009-2012)

• DRAM cartel fines: $729 million total (2004-2006)

• Intellectual Property and Interoperability – ensure that standard essentialpatents are licensed on F/RAND terms (e.g., FTC v. Rambus)

Private Enforcement

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• US antitrust laws may also be enforced by private plaintiffs, includingthrough class actions

• Numerous lawsuits tend to follow action by enforcement authorities:

• LCD price-fixing litigation

• Apple eBooks price-fixing class action

• Consumer complaints and business disputes also produce litigation:

• Apple sued for requiring iPod owners to use iTunes software and forexclusive agreement with AT&T for iPhone service

• Keurig Green Mountain sued for introducing Keurig 2.0 coffee brewerand attempting to exclude coffee pod competition

US Conclusions

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• US enforcement agencies are wary of interfering with technology markets

• Over-enforcement could stifle innovation, and the pace of technologicalchange can make market power transient

• Most enforcement remains in traditional markets

• Risk factors:

• Efforts to frustrate adoption of next-generation technology

• Acquisition of an innovative or disruptive competitor

• Price increases, particularly as a result of collusion

• Private antitrust actions (including class actions) are a threat

EU Developments

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Key Issues in EU Regulation of theTechnology Sector

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• Innovation: How best to encourage it

• Intellectual Property Rights: Relationship with competition policy

• Interoperability

• Standard Setting:• Patent ambush• Breach of FRAND commitments

• Internet / Social Media

The Microsoft case – A watershed casefor technology markets

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• Themes of innovation / IPRs / Interoperability meet together

• Innovation best protected by competition law, even if IPRs protection limited

• The EU Commission were more willing to apply Article 102 to abuses basedon IPRs

Path to Microsoft

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• Interaction between IPRs and Article 102 examined by the Court and theCommission as a refusal to supply/license

• Early cases:• IBM• Volvo v Veng• Magill• IMS Health

The Microsoft Case

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• Facts

• Decision

• New products

• Objective justification

• Regulating technology industries

• Fast moving markets v static assessment

• Microsoft legacy – IBM 2011

Competition and Standard Setting

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• Patent ambush: The Rambus case

• Breach of FRAND commitments• Qualcomm• Samsung and Motorola• Huawei

Internet / Social Media

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• Competition law enforcement follows technologies

• Hardware/software regulation gives way to focus on internet search

• Google case

• Future frontiers• Social media• Technology services (SAAS / Cloud based products)

Conclusion

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• Similar themes occupy US and EU regulators

• Protecting innovation is the main priority of enforcement authorities

• Intellectual property issues are also a priority (e.g., standard setting andinteroperability)

• Regulators will intervene in technology markets to safeguard innovation andprevent collusion

• Greater risk of private litigation in the US

eu-competitionlaw.com

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• CPD points and CLE credit are available for this webinar.

• CPD points and CLE Credit may be collected by emailing:• Europe.marketing@bryancave.com

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