Archives For Commissioner Ohlhausen

Commissioner Ohlhausen’s Qualcomm Dissent Points the Way Toward Sound Antitrust Enforcement

Alden Abbott —  18 January 2017

The Federal Trade Commission’s (FTC) regrettable January 17 filing of a federal court injunctive action against Qualcomm, in the waning days of the Obama Administration, is a blow to its institutional integrity and well-earned reputation as a top notch competition agency.

Stripping away the semantic gloss, the heart of the FTC’s complaint is that Qualcomm is charging smartphone makers “too much” for licenses needed to practice standardized cellular communications technologies – technologies that Qualcomm developed. This complaint flies in the face of the Supreme Court’s teaching in Verizon v. Trinko that a monopolist has every right to charge monopoly prices and thereby enjoy the full fruits of its legitimately obtained monopoly. But Qualcomm is more than one exceptionally ill-advised example of prosecutorial overreach, that (hopefully) will fail and end up on the scrapheap of unsound federal antitrust initiatives. The Qualcomm complaint undoubtedly will be cited by aggressive foreign competition authorities as showing that American antitrust enforcement now recognizes mere “excessive pricing” as a form of “monopoly abuse” – therefore justifying “excessive pricing” cases that are growing like topsy abroad, especially in East Asia.

Particularly unfortunate is the fact that the Commission chose to authorize the filing by a 2-1 vote, which ignored Commissioner Maureen Ohlhausen’s pithy dissent – a rarity in cases involving the filing of federal lawsuits. Commissioner Ohlhausen’s analysis skewers the legal and economic basis for the FTC’s complaint, and her summary, which includes an outstanding statement of basic antitrust enforcement principles, is well worth noting (footnote omitted):

My practice is not to write dissenting statements when the Commission, against my vote, authorizes litigation. That policy reflects several principles. It preserves the integrity of the agency’s mission, recognizes that reasonable minds can differ, and supports the FTC’s staff, who litigate demanding cases for consumers’ benefit. On the rare occasion when I do write, it has been to avoid implying that I disagree with the complaint’s theory of liability.

I do not depart from that policy lightly. Yet, in the Commission’s 2-1 decision to sue Qualcomm, I face an extraordinary situation: an enforcement action based on a flawed legal theory (including a standalone Section 5 count) that lacks economic and evidentiary support, that was brought on the eve of a new presidential administration, and that, by its mere issuance, will undermine U.S. intellectual property rights in Asia and worldwide. These extreme circumstances compel me to voice my objections.

Let us hope that President Trump makes it an early and high priority to name Commissioner Ohlhausen Acting Chairman of the FTC. The FTC simply cannot afford any more embarrassing and ill-reasoned antitrust initiatives that undermine basic principles of American antitrust enforcement and may be used by foreign competition authorities to justify unwarranted actions against American firms. Maureen Ohlhausen can be counted upon to provide needed leadership in moving the Commission in a sounder direction.

P.S. I have previously published a commentary at this site regarding an unwarranted competition law Statement of Objections directed at Google by the European Commission, a matter which did not involve patent licensing. And for a more general critique of European competition policy along these lines, see here.

In European Union, Facebook, Federal Trade Commission, Intellectual Property, International, Patent, Platforms, Section 5, Truth on the Market , ,
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David Balto on Some Quick Observations on the Drive for UMC Policy Guidelines

totmauthor —  1 August 2013

David Balto is a Public Interest Attorney at the Law Offices of David Balto

I appreciate the opportunity to provide comments on the current Section 5 discussion and add a few modest thoughts about the very thoughtful speeches of Commissioners Wright and Ohlhausen. I must admit, that as a former FTC Policy dude my mouth salivates at the thought of any new Guidelines. After all what could be more fun that coming out with thought pieces, speeches, commentaries, drafts, revised drafts, reply drafts, and more drafts. What could be more enjoyable than spending hundreds of hours parsing through every word to debate and detect every nuance. And then providing a document that is both sufficiently flexible and informative that it can live and adjust to changing circumstances – that sounds like fun. Why this sounds like an effort that would make any Talmudic debate sound like a simple task.

So I wonder at the outset:  what is the need for any policy statement or guidelines. Although both speeches perhaps may raise the specter of unwarranted enforcement I simply do not see it. No matter what recent FTC administration we refer to the actions seem extremely modest. There are less than a handful of cases in the past decades.

Indeed, the lack of enforcement  should raise concern about the ability to issue any type of policy statement. The question, quite legitimate is whether the agency has the experience from Section 5 enforcement to fully articulate the set of issues and criteria necessary to conclude a practice is an unfair method of competition.

Another concern might be that unclear Section 5 powers might stifle firms from engaging in potentially procompetitive or efficient conduct. So I decided to test that proposition (very informally) by reading through a handful of antitrust counseling treatises on issues such as distribution.  I could find nary a single mention of some additional liability firms faced or additional uncertainty because of the FTC’s Section 5 powers. Obviously the areas where the Commission has tread so far – invitations to collude, improper information sharing and deception involving standards are the types of conduct that have so little redeeming merit that there is no concern over stifling procompetitive conduct.

So as the old lady in the Wendy’s commercial of the 1980s says “Where’s the Beef?”

Now as to the speeches I have a few observations.

First, Section 5 is a law enforcement statute. Congress enacted it to enable the Commission to challenge conduct that was broader that the Sherman Act. It is not a regulatory statute. Like all antitrust laws (except that adopted cousin the Robinson Patman Act) it is a generalist statute, broad in nature to give the Commission and the courts the ability to adapt to changing conduct and changing market conditions. We do not issue policy statements for the other antitrust statutes (there is no statement defining an unreasonable restraint of trade).  Why should there be a statement defining an unfair method of competition?

Second, neither of the speeches recognize that Section 5 is an incipiency statute (like the Clayton Act). Congress intended the FTC to use the statute to attack practices in their incipiency before they become full blown violations.

Third, Commissioner Ohlhausen relies in detail on the Clinton-era executive order on Regulatory Planning and Review EO 12866. I find the idea intriguing but that EO is intended for regulatory agencies and their regulatory regimes – not law enforcement. There are strong reasons why it is necessary to rein in regulatory agencies especially because of the costs they can impose through their regulations. A single law enforcement action does not raise these concerns.

Commissioners Ohlhausen suggests that the agency should hold its fire if there may be other regulatory alternatives (“using the most direct route”). Let’s look at the Phoebe Putney merger or the situations involving regulatory abuse such as the FTC’s 2003 case against Bristol Myers. Would we really feel confident in lobbying the Georgia state legislature or the FDA as an alternative?

Finally, I am concerned about one possible unintended consequence. 29 states have little FTC Acts which condemn unfair methods of competition. Those Acts have led to dozens of important enforcement actions benefitting consumers. Any FTC policy statement on UMC can potentially weaken enforcement under those Acts.

In Antitrust & Competition, Federal Trade Commission, Section 5, Unfair Methods of Competition Symposium , , , , , ,
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