Antitrust Lawyer Blog Commentary on Current Developments

Hudson Institute’s Antitrust Policy in an Age of Rapid Innovation

In light of the Department of Justice's attempt to block telecom giant, AT&T from acquiring T-Mobile, the Hudson Institute recently released a report discussing antitrust policy as it applies to the growth of innovation. See Irwin Stelzer, Antitrust Policy in an Age of Rapid Innovation, BRIEFING PAPER (Hudson Inst., Washington, D.C.) Oct. 2011.
Key Takeaways:

Policy Lessons from AT&T: Antitrust law remains powerful and relevant in combating anti-competitive activity and for preserving macroeconomic efficiency. Despite powerful lobbying efforts by large tech companies such as AT&T, the DOJ Antitrust Division remains relatively independent from political pressure. Moreover, Stelzer maintains that government regulation in a high-tech economy remains relevant, contrary to some critics of antitrust policy who say that “what was good for the days of steel-making and a brawn-driven economy is bad for a high-tech, brain-driven economy.”

Traditional Antitrust Concerns Remain Relevant: Stelzer elaborates on this assertion by stating that antitrust laws are needed for preventing the abuse of market dominance now more than ever. He argues that competition among firms breeds innovation, lowers prices and elevates productivity and living standards. Moreover, in Stelzer's opinion, anticompetitive acts are harder to distinguish from competitive tactics in today's economy, and such distinctions should be made on a case-by-case basis, suggesting that competition policy is still needed.

Competition Beats Regulation: Stelzer maintains that although regulatory supervision is preferable as a check on monopolies, such regulation outlives its usefulness. When changes in technology force a shift in the economics of the regulated industry that enables competition. He contends that the government should be present to prevent the accumulation of monopoly power through checks on mergers and anticompetitive tactics, but stop where regulation chokes innovation. He reasons that when replacing “imperfect regulation by imperfect competition” in certain industries, consumers benefited significantly.

The Social Consequences of Antitrust Policy: Though there are some people (whether those in government, those considered as “old money” or businessmen) who are opposed to competition policy because it lowers barriers to entry, competition policy is vital to ensuring that start ups created by entrepreneurs are able to prosper. The report notes that competition policy creates a relative ease of entry that spurs economic and social mobility which prevents class warfare prevalent in other nations.

Antitrust in High-Tech Industries: The report lays out concerns that must be considered as antitrust policy is applied to the high tech industry. Is the market definition process a reliable indicator of anti-competitive behavior? While the author recognizes the arguments against relying on defining the relevant market, he does see some value in it. The author notes that when considering market share in industries prone to rapid technological change, (although difficult) it may be beneficial to place more focus on future market shares rather than existing market shares, particularly in the technology industry. To be more specific, Stelzer argues that if companies like Google and Apple grow at their targeted rate, they will eventually have to make acquisitions that either complement or expand their products and offerings. An analysis based on these projected growth rates may indicate whether these acquisitions will encourage innovation or create barriers to entry.

Hauwa Otori
(202) 589-1834

Melody Cheung
(202) 589-1834