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2011/SOM1/CPLG/028

Agenda Item: 8

Update on Developments in Competition Policy and Law - United States Federal Trade Commission

Purpose: Information

Submitted by: United States

/ Competition Policy and Law Group Meeting
Washington, D.C., United States
7-8 March 2011

Update on Developments in Competition Policy and Law

United States Federal Trade Commission

March 8, 2011

·Thank you for this opportunity to report on some key policy and enforcement activities since our last meeting.

2010 Horizontal Merger Guidelines

·In August 2010 the FTC and Department of Justice issued the first major revision to the agencies’ horizontal merger guidelines in 18 years. The goal of the revision is to bring the guidelines closer to how the agencies actually evaluate mergers. They detail the techniques and main types of evidence that the agencies typically use to predict whether horizontal mergers may substantially lessen competition.

·The revised guidelines derive from the agencies’ collective experience in assessing thousands of transactions. In crafting the revisions, the agencies considered a wide range of opinions gathered through a series of joint public workshops, as well as hundreds of public comments submitted by attorneys, academics, economists, consumer groups, businesses and foreign practitioners and officials.

·The 2010 guidelines take into account legal and economic developments since the 1992 guidelines were issued. They incorporate many insights of modern antitrust law, more sophisticated economic thinking, and global enforcement experience. The revised guidelines are not intended to represent a change in the direction of merger review policy but to offer more clarity on the merger review process in order to better assist the business community and, in particular, parties to mergers and acquisitions.

·The 2010 guidelines are different from the 1992 guidelines in several important ways.

·They reflect the reality that market definition is an important part of the analysis, but not necessarily the starting point and certainly not an end itself, and market concentration is a tool that is useful to the extent it illuminates the merger’s likely competitive effects.

·The revised guidelines also explicitly recognize that as a result of a merger, the merged firm can attain a market position from which it may be tempted to engage in exclusionary conduct, or that may lead it to engage in conscious parallelism that harms competition and consumers.

·They explain in more detail the economic basis of unilateral effects, including effects on innovation, which the previous guidelines and commentary had only described briefly.

· Another key revision is the modification of entry analysis to avoid the rigid formalism of the two-year standard and to focus more on the entry efforts an entrant might practically employ in a given market.

·The 2010 guidelines introduce a new section on “Evidence of Adverse Competitive Effects,” which discusses several categories and sources of evidence that the agencies have found informative in predicting likely competitive effects of mergers.

·They also add new sections on powerful buyers, mergers between competing buyers, and partial acquisitions.

·We hope that our colleagues in other jurisdictions will find the 2010 guidelines to be informative.

Update on Intel case

·At the last CPLG meeting, I reported on the FTC’s complaint against Intel, the world’s largest computer chip manufacturer, for allegedly using its dominant market position for a decade to stifle competition and strengthen its monopoly. As you may recall, the FTC charged that Intel carried out a systematic campaign to shut out rivals’ competing chips by cutting off their access to the marketplace, thereby depriving consumers of potentially superior and lower-priced microchips. Last August, the Commission settled its case after eight months of litigation.

· The Commission’s consent order puts an end to the anticompetitive practices alleged in our complaint and prevents similar anticompetitive conduct in the future. As a result, Intel will not be able to penalize its customers for using its competitors’ chips, stunt its competitors’ growth with the threat of intellectual property litigation, or lock its competitors out of the market by designing incompatible products. At the same time, the settlement will allow Intel to move forward using a more procompetitive approach, leaving the company room to innovate and offer competitive pricing. The consent order is available on our website. ( )

Merger Enforcement

· The FTC continues to maintain an active workload of merger investigations. I will highlight two cases; one involves merger enforcement in a high-tech market, and the other, international cooperation.

·The Commission tackled a challenging case in a fast-growing, high-tech market, reviewing the Google’s proposed acquisition of mobile advertising network company AdMob. Google and AdMob were the number 1 and 2 mobile advertising networks and competed head-to-head for the previous two years. When the investigation began, Apple was not in the market. However, during the investigation, Apple acquired the third largest mobile advertising network and soon thereafter unveiled its own, competing mobile advertising network, iAd.

· Although the merger initially raised serious concerns that Google would be able to behave as a monopolist if it acquired its primary competitor, the agency’s concerns ultimately were outweighed by Apple’s entry. Apple was in a unique position to go quickly from zero to a very substantial share of the mobile advertising market because of: its close relationships with application developers and users; its access to a large amount of proprietary user data; and its ownership of iPhone software development tools and control over the iPhone developers’ license agreement.

· As a result, the FTC determined that AdMob’s success on the iPhone platform was not likely to be an accurate predictor of AdMob’s competitive significance in the future, whether it was owned by Google or not.

· The FTC closed its investigation in light of this significant change in the market which rendered our initial concerns moot. We issued a press release explaining the reasons for closing and our intent to continue to monitor competition in this market. As this case illustrates, in a fast-developing market, it is important to carefully monitor developments in real time and assess how they affect the competitive impact of a potential merger. Policing high tech markets requires both speed and adaptability.

·In May 2010, Agilent Technologies, Inc. and Varian, Inc., two leading global suppliers of high-performance scientific measurement instruments agreed to sell three of their product lines in order to proceed with their merger. The FTC alleged that the acquisition would have violated U.S. antitrust laws by reducing competition in price, innovation and customer service for three types of instruments because the companies currently compete with one another in these markets.

·This enforcement action is noteworthy from the standpoint of international cooperation. Throughout the investigations, FTC staff coordinated enforcement efforts with staff of foreign competition agencies, including the Australian Competition and Consumer Commission and Japan Fair Trade Commission, under the relevant bilateral cooperation agreements. Cooperation and coordination of this type facilitate consistency in enforcement decisions and remedies in multi-jurisdictional merger reviews.

·Thank you.