CCIA Testifies at House Antitrust Hearing

September 16, 2010

Computer & Communications Industry Association President & CEO Ed Black is scheduled to testify Thursday at a House Judiciary subcommittee hearing, “Competition in the Evolving Digital Marketplace.” Antitrust oversight has received more attention since the Obama administration and Black has been an advocate for balanced competition policy for the high tech industry for 25 years.

Even more than most markets, competition is especially critical for the high tech industry because these companies are typically characterized by a heavy reliance on complicated patent portfolios, network effects, economies of scale, standardization, and interoperability. These inherent features though often make anticompetitive actions difficult to detect, harder to remedy, and more detrimental to innovation.

While overly aggressive antitrust enforcement can harm industry, antitrust enforcement can also help when a company is using its market dominance to block innovation. Antitrust enforcement helped pave the way for Silicon Valley as we know it. Antitrust oversight of IBM prompted unbundling of hardware and software, which allowed an independent software industry to emerge. Before that, antitrust authorities required AT&T to license one of its key inventions, the transistor, which gave rise to the modern hardware industry.

The following quotes can be attributed to CCIA President & CEO Ed Black’s testimony:

“For the past 25 years I have had a front row seat (and sometimes a courtroom seat) for the antitrust battles of the tech industry. The successful outcome of some these can be linked to spurts of innovation and economic activity that has propelled the US economy forward. As our country looks for no cost ways the government can help boost the economy, ensuring our antitrust policies are doing their job is a sound, laudable step.

“It is critical for authorities to be watchdogs because when companies face bullying behavior by a predominant company which has real power to lock them out of the market or end orders for their product, the risks of retaliation often mean silence – without a subpoena.

“Through the numerous cases we have been involved in, CCIA has seen certain characteristics arise as red flags in determining whether behavior is benign or anticompetitive. These red flags pertain to consumer “lock-in,” the presence of chokepoints, and the entrenchment of incumbents.”

(Currently, CCIA has filed a case against IBM for abusing locked-in customers in an attempt to maintain its mainframe monopoly.)

“Chokepoints in high tech markets are common. This happens when customers have to pass through a specific market to access related products and services. When chokepoints are abused the dominant company has the power to squeeze both consumers and the product or service suppliers so they accept higher costs. Two examples of chokepoints are the market for semiconductors and Internet Access.

“Although not a completely new phenomenon, the frequency with which antitrust is being wielded cynically by companies to hurt their fiercest competitors is increasing and they do so because their competitors’ innovative business models threaten their own entrenched business models, bloated margins and legacy revenue streams. These targeted legal and PR campaigns are actually damaging to competition.

“It is also important to remember that big doesn’t equate to bad and to really scrutinize ulterior motives of those complaining as well as the company’s behavior — such as whether they lock in customers or really lock out competitors. Determining the legitimacy of a complaint also involves looking at how much competition exists and whether the market has low barriers to entry. It’s much harder to start building semiconductors that to start a search engine, for example.

“Basically we want a market where the best, most innovative ideas and disruptive technologies can make it out of the garage, dorm room or boardroom and into the marketplace without being squashed by old, established companies trying maintain their market share at the expensive of the nation’s bottom line.”

Click here to read the full testimony


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