U.S. hearing on competition in the digital marketplace

On 16 September 2010 the Subcommittee on the Courts and Competition Policy of the U.S. House Judiciary Committee held a hearing on Competition in the Evolving Digital Marketplace.

A prepared statement of the U.S. Federal Trade Commission, delivered by Bureau of Competition Director Richard Feinstein, focused on the principles applied by the agency to antitrust analysis in markets where technology advances and the competitive situation changes rapidly. According to the prepared statement, U.S. antitrust laws are flexible enough to accommodate the requirements of markets where such changes are characteristic.

The statement emphasized the role of Section 5 of the FTC Act in rapidly developing markets, where new products and business models may complicate antitrust analysis.  It allows FTC intervention in “unfair methods of competition” that do not necessarily constitute traditional antitrust violations under Sections 1 or 2 of the Sherman Act. Moreover, the remedies at the FTC’s disposal are particularly suited for new or dynamic markets where novel issues may arise, as they carry less risk of chilling a leading firm’s incentives to compete given their lack of punitive elements and the low risk of treble damages in follow-up private litigation. As an example of successful application of Section 5 of the FTC Act, the statement noted the FTC’s recent settlement with Intel (See Newsletter 4/2010, p. 2).

The statement also considered the challenges of merger review in markets where technological change is rapid and predicting the future is difficult given that past competitive facts, such as past and current market shares, may have limited indication value for predicting the future competitive situation. The FTC must therefore, in addition to current competitive factors, assess the impact and significance of firms and products that will shape future competition. As an example of such considerations, the statement cites the FTC’s decision not to oppose Google’s acquisition of AdMob. In that decision, the Commission allowed Apple’s foreseen entry into mobile advertising, through its iAd network, to allay concerns over loss of competition between Google and AdMob to the extent that no action was taken (See Newsletter 3/2010, p. 3). [Juha Vesala]