Competition

Staff at the European Union’s Competition Directorate are recommending formal charges against Intel, according to the Wall Street Journal. At the heart of the EU case are AMD’s allegations that Intel withholds rebates from computer makers when they buy too many AMD chips. “It is simply a coercive tactic,” Tom McCoy, AMD executive vice president for legal affairs, said this month. Forbes is reporting that AMD’s complaints include the offering of rebates to computer manufacturers for shutting out AMD and allegations that Intel has engaged in predatory pricing aimed at keeping AMD’s competing CPUs (central processing units) out of the market. Intel denies these charges. This could just be negative spin for volume discounts. Intel, or any other firm, offers Read More ›

Life is about “repeating the same mistakes” in different contexts, says Larry Lessig. In the current issue of Wired, the Stanford law professor compares the prevailing wisdom in the 1990s that Microsoft’s operating system would chill competitive innovation in the software industry with the current popular wisdom that we need net neutrality regulation to prevent broadband providers from blocking any use of the Internet which threatens their bottom line. Regulatory enthusiasts didn’t in the 1990s foresee the success of Linux, according to Lessig, and they may not appreciate the significance of municipal networks. According to MuniWireless.com, there were 312 cities and counties in the U.S. with networks up and running, or in the deployment or planning phase at the end Read More ›

Jonathan S. Adelstein
AT&T’s opponents may not get everything they thought they had from the FCC’s review of the AT&T/BellSouth merger. The process was a disgrace, as I discussed here and elsewhere leading up to the final decision. No federal or state regulator identified any competitive or public interest harms, yet Commissioner Jonathan S. Adelstein and Commissioner Michael J. Copps leveraged the process to deliver cash to state and local officials, unwarranted discounts to AT&T’s competitors and 3,000 previously outsourced positions to the labor unions.
AT&T also volunteered to maintain “a neutral network and neutral routing in its wireline broadband Internet access service,” subject to certain limitations. I argue that a nondiscrimination principle applied to the Internet would outlaw the partnership, bundling and pricing strategies that are the basis for all advertising efforts (see, e.g., this and this).

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HB 6456 — the bill which would streamline video franchising in Michigan — was signed into law by Gov. Jennifer Granholm, who noted that she expects it to create 2,000 jobs. Michigan becomes the 11th state to reform video franchising.

The FCC finally approved a long-overdue reform of anticompetitive video franchise rules by a vote of 3-2 after nearly a year of study. An Order will be issued sometime within six months. Grasping local officials won’t be able to drag out negotiations over franchise agreements with video service providers until the exhausted applicants capitulate to legal blackmail, a process which sometimes takes a year or two. Now, the negotiations will have to be completed within 90 days.
The deregulatory milestone is a victory for consumers, who will benefit from more rapid investment in competitive video offerings by AT&T and Verizon. It will also further reduce the possibility that broader telecom reform legislation will move through the next Congress, meaning fewer options to enact net neutrality regulation or pump up the current unsustainable universal service regime (which could lead to taxation of Internet traffic).

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Here is more proof that cellphones compete with landline phones, and it’s not from the usual industry or FCC sources: Most polls depend on land-line phones, but one in 10 adults now has only a cellular telephone. That poses a potential sampling problem, since nearly half of voters with only a cellular phone are under 30 years old, compared with 13% who have land-lines[,] according to the Wall Street Journal.

Thomas O. Barnett, Assistant
Attorney General for Antitrust
Antitrust enthusiasts thought they scored a coup in 2004 when they persuaded Congress to encourage the courts to conduct more assertive reviews of corporate mergers (with rights of participation for gadflys, busybodies and other pests) pursuant to the Tunney Act (see my previous post). Apparently, the move was too clever by half. The Antitrust Division sidestepped this feature of the Tunney Act completely by approving the AT&T-BellSouth merger with no conditions. The New York Times claims the Bush Administration has abdicated its responsibility to act as a “referee,” as if one is needed. The newspaper complains the administration hasn’t brought a single major monopoly case under the Sherman Act, as if that proves anything. Most amusing of all, it notes that career officials were “demoralized” when the administration cleared Whirlpool’s acquisition of Maytag, inferring this could happen again. The Times didn’t explain the relevence of that. Apparently, some believe, bureaucrats ought to be able to perform their jobs as they see fit, or at least their judgment is superior to elected politicians or officials who’ve been confirmed by the Senate.

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Imagine if you ran a business and independently came to the same conclusion as your competitor about the products you would offer and the customers to whom you would offer them? That would be called “conscious parallelism,” a result of legitimate shared economic interests. That’s always been perfectly legal. Well, there are some trial lawyers who believe that parallel business behavior is or could be proof of conspiracy, which would be a violation of the Sherman Antitrust Act. The Court of Appeals for the Second Circuit agreed in a case called Twombly v. Bell Atlantic. The Supreme Court is now considering a petition for certiorari. The case alleges that the Bell operating companies “conspired” not to compete against one another Read More ›

Microsoft’s legal challenge to the European Commission’s antitrust ruling got underway this week in the European Court of First Instance. At issue on the first day of the hearing was the requirement that Microsoft separate its media player from its operating system. The commission’s ruling and subsequent enforcement gets more absurd every day, and I can’t imagine it would have been taken seriously by any competent court of law in the U.S. Jean-Francois Bellis, an attorney for Microsoft, told the court that 1,787 versions of Windows without Media Player (Edition N) have been ordered, compared with 35 million versions of Windows with Media Player, the Financial Times reports. The lawyer for the European Commission conceded that “I am afraid we Read More ›

Microsoft has been warned by Commissioner Neelie Kroes of the European Union that there are some features it should not bundle into its new operating system (see, e.g., “European regulator warns Microsoft about new operating system“ from European Business News Online). The EU’s competition directorate has already decided that competition could be costly and involve risk for Microsoft’s competitors. Yes, it sounds ridiculous — but essentially that’s what it is. Kroes’ warning may indicate that Microsoft is losing its freedom to innovate and in effect will now be required to obtain preapproval from the EU for any new product design. If so, the EU could be doing to Microsoft what the FCC did to the Regional Bell Operating Companies by Read More ›