Never Mistake Activity for Achievement, Antitrust Edition

Josh Wright —  1 December 2011

FTC Chairman Leibowitz recently gave a speech in which he took on a number of issues, but one in particular caught my eye.  In a portion of the speech describing how antitrust has updated its procedures in order to become more efficient and avoid the problem of having decade-long cases focused upon technologies that are obsolete by the time the case is resolved, Leibowitz offers the following example of Commission success:

The best, recent example of the need to move quickly in the high-tech area is our recent Intel case.11 Our investigation of Intel started out very slowly and went on for quite some time, but once the Commission issued process and then a complaint, the litigation proceeded with alacrity and ended with a consent less than a year later.

We think the remedies in the consent do much to protect consumers while still allowing Intel to innovate, develop, and sell new products. And I am proud of the relationship that we have been able to maintain with Intel since then. Still, we might have gained more for consumers: much was lost in the years between the start of the investigation and the litigation’s conclusion, and competition for CPUs and other components in personal computers might have been different had we moved faster initially. And moving quickly might have been fairer to Intel too.

As a result of what we have learned from Intel and other cases, the Commission is no longer bogged down in outmoded procedures. Much of what we’ve done at the Commission in recent years has been to make us better at getting to the bottom of investigations and resolving them faster to ensure that businesses get certainty and consumers get protection quickly. That was at the heart of the changes to our Part 3 rules, you get an antitrust trial, and it is implicit in every effort we make to learn more about industries and develop our internal expertise. We have also pushed to make “go/no go” decisions on investigations earlier so that they don’t linger on. All this reduces expenses and, I believe, allows us to act with a lighter hand.

There is a lot about this strikes me as misguided.

First, lets start broadly.  Striking quickly and striking accurately are two different things.  As John Wooden famously says “never mistake activity for achievement.”  Bill Kovacic has emphasized that case counts alone (nor win rates alone) are not very informative regarding agency performance.   Claims of agency success based upon activity levels in extracting settlements and such should be viewed skeptically without evidence that the activity prevented anticompetitive activity and improved consumer welfare.  Doing things faster doesn’t mean doing them any better.

Second, so what about accuracy?  If Intel is the “best example” the Chairman can come up with of antitrust enforcement in high-tech industries, this is not a good sign for the Commission.  I’ve written quite a bit about the Intel complaint and settlement — and so won’t belabor the point here — but suffice it to say that the evidence does not support the claim that the settlement improved consumer outcomes.  In fact, consumers are probably worse off in my view.  Reasonable minds may differ on these points but it is difficult to evaluate the evidence and come away confident that the settlement is as successful as claimed.  And that’s not even counting the peculiar endorsement it gives Lepage’s, which has been overwhelming condemned a standard which threatens pro-consumer conduct.

Third, the Chairman writes: “And I am proud of the relationship that we have been able to maintain with Intel since then.”  Ugh.  Developing longstanding relationships with Intel and other companies is not something for the Commission to be proud of.  Its just not.  In this case, the relationship derives from the product design elements of the Intel settlement.  Remember this language?

Respondent shall not make any engineering or design change to a Relevant Product if that change (1) degrades the performance of a Relevant Product sold by a competitor of Respondent and (2) does not provide an actual benefit to the Relevant Product sold by Respondent, including without limitation any improvement in performance, operation, cost, manufacturability, reliability, compatibility, or ability to operate or enhance the operation of another product; provided, however, that any degradation of the performance of a competing product shall not itself be deemed to be a benefit to the Relevant Product sold by Respondent. Respondent shall have the burden of demonstrating that any engineering or design change at issue complies with Section V. of this Order.

I’m sure Intel’s lawyers and engineers have a fine relationship with the FTC.  But lets not mistake that with agency success or something that consumers should celebrate.

Never mistake activity with achievement.