Antitrust

The competitive dynamic is especially important in high-tech industries where rapid innovation is a defining characteristic. Competition is one of the fundamental drivers of innovation. To a greater extent than most markets, high-tech and internet-centric industries are characterized by a heavy reliance on complicated patent portfolios, network effects, economies of scale, standardization and interoperability. These inherent features often make anticompetitive actions difficult to detect, harder to remedy, and more detrimental to innovation and venture capital allocation.

Admittedly the line between legitimate competition and harmful anticompetitive actions can be blurry in fast moving, quickly changing tech markets, and there is a danger of erring on either side of enforcement. Regulators must be sure abide by the bedrock principle of antitrust law: consumer, not competitor, welfare is paramount.  Therefore, government intervention must focus on legitimate harms to consumers — not protecting inefficient competitors or particular business models– when weighing the merits of an antitrust case.

CCIA’s View:

Not all high-tech markets are created equal.  For example, the market for semiconductors and markets for Internet applications and services are nothing alike and necessitate different market analysis.  Semiconductor markets involve huge upfront investments in R&D, incredibly dense patent thickets and multi-billion fabrication plants.  As a result, market entry by new competitors is difficult and unlikely in the short run.  The Internet, on the other hand, is characterized by extremely low barriers to entry.  Because anyone with a good idea can get venture capital funding and bring his or her idea to market quickly, the Internet is characterized by vibrant competition.  Market leaders can become afterthoughts in the span of just a couple of years.  As a result, traditional market share driven antitrust analysis can be misleading.  Not too long ago, Myspace had more than three-quarters of the social media market.  Now, Facebook and Twitter are market leaders and Myspace has been relegated to a niche player.CCIA believes in smart, well-targeted antitrust enforcement that recognizes different market realities.  As such, regulators must be cognizant of choke points where market characteristics lead to competition problems.  Last-mile and backhaul telecommunications and Internet access markets are perfect examples of industries that necessitate special treatment as the high capital costs and huge economies of scale make competition inefficient and unlikely over the long run.  In other markets, like the provision of nation-wide wireless services, where scarce valuable market inputs like wireless spectrum are shared between a relatively few number of competitors, it is important for regulators to protect the competition that does exist, as new entry is unlikely and wireless carrier consolidation is not only harmful to consumers, but affects downstream and upstream markets for wireless handsets and mobile applications and services.   Given the vast differences in technology markets, CCIA’s positions on antitrust cases are not ideological but case specific and fact driven.

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