Likely Monopolization Suit Targets

Josh Wright —  21 January 2009

I’ve written previously about the upcoming surge in monopolization enforcement deriving from a “perfect storm” of sorts, including: (1) an incoming administration dedicated to “reinvigorate antitrust enforcement,” (2) an outgoing administration heavily and publicly criticized for lack of monopolization enforcement, and (3) interjurisdictional competition between the US and EU as the world’s primary antitrust enforcer which is likely to result is some “convergence” in the US toward EU style monopolization enforcement (in my view, a troublesome development). I predicted that:

The place where all the action is, I think, is monopolization. The Obama camp is not going to want to be perceived as creating job losses. I think that is most likely to be the case in attacking mergers between firms in a financial nose dive. But attacking the big bad monopolist is different. Monopolists are not perceived to be in dire financial straits (even when they are). They have deep pockets. They are Microsoft. Single firm conduct can be sold to the public as exploitative and coercive and maybe even linked to the sort of anti-corporate sentiment that has been generated in fraud and corruption cases. On top of this, with the FTC v. DOJ split on monopolization which is likely to be resolved in favor of the dissenting FTC Commissioners, the promise to return to Clinton administration like monopolization enforcement numbers, this is a bad time to be a firm with a dominant position — especially in highly visible industries (Pharma, health care, and tech come to mind).

Well, the EU’s opening move the new but classic Microsoft IE suit. What’s going to be first for the FTC or DOJ in terms of a big name monopolization suit under the Obama/ Elhauge/ Leibowitz antitrust regime? Maybe a new Microsoft suit? Will the FTC pursue a case against Intel? More patent holdup cases? The AAI, which I believe has ties to and the ear of the current administration, suggests IBM — which is also the subject of an abuse of dominance complaint in the EU for tying its mainframe hardware to its operating system. Such a case would fitt the profile of what I’ve predicted. Here’s an excerpt from the press release:

High-tech markets can be particularly vulnerable to anticompetitive actions. Their complexity, reliance on interoperability and standardization, system switching costs, the presence of extreme economies of scale and the multiplying power of network effects give dominant firms increased incentive to engage in actions that harm competition, stall innovation and limit consumer choice. The coming of a new US administration that understands the importance of credible antitrust enforcement portends well for competition and innovation in all sectors of the economy, especially in cutting edge industries. President Obama indicated in his statement to AAI that he would make bringing more antitrust cases a priority, specifically in regards to actions against monopolists, an area that received virtually no attention from the DOJ during the last administration. Having the DOJ or FTC investigate this case would be an important way for the new technology-savvy Obama administration to show its commitment to the consumer-oriented principles the President espoused during the recent campaign. However, this remains just one example of the many economic sectors that deserve heightened scrutiny after 8 years of relative neglect under the Bush administration.

I’m skeptical about including “demonstration of tech-savvyness” as a factor in the decision whether to investigate or prosecute. With respect to network effects and switching costs I wonder what the folks at AAI think about this?  But that’s besides the point. Who do you think are the most likely first monopolization targets of the Obama antitrust regime?