Letter from the Editor – Fall 2012

In the Autumn 2012 issue of the CPI Journal, we are very pleased to present a Symposium on Tying (structured around the recent Brantley case), a Colloquium on Media Plurality, and a special article on the risks of excessive litigation for online platforms. Our Classic for this issue is Michael Whinston’s groundbreaking 1990 article.

The Tying Symposium includes reactions to the issues raised by the recent Brantley v. NBC Universal class action case that concerned bundling multi-channel packages in cable and satellite TV services. The Symposium begs the question: Have the economists and the lawyers gotten closer to an agreement surrounding vertical restraints or are these simply divergent views on an important antitrust conduct?

Dennis Carlton & Michael Waldman’s article looks at the current state of the economic theory of tying. They note that the Brantley decision is in line with economic theory, which stresses the importance of ensuring that no unambiguous reduction in social or consumer welfare be possible before discouraging tying behavior. In contrast, Peter Carstensen proposes a return to a traditional view of tying, where tying—while not necessarily per se illegal—should remain presumptively illegal unless a defendant can offer a legitimate justification for it. One of his arguments is that, as one of the prohibited conducts targeted by Congress in 1914, a presumption of illegality is a rational policy judgment.

Dan Crane then looks at the policy implications of Brantley: Should a conduct that results in transfers from consumers to producers (exploitative conduct), but that does not change the level of market power, be prohibited? The article presents a discussion on whether exploitative theories belong in the realm of antitrust. Whether tying should be viewed under a per se vs. a rule-of-reason lens is the focus of the article by Sonia Di Giannatale & Alexander Elbittar that, in reviewing the economics literature and some recent antitrust decisions, concludes that even where competition legislation appears to use per se approaches for condemning tying, there are conditions that require a rule-of-reason approach.

The final piece in the Symposium, by Herb Hovenkamp, summarizes the extreme positions taken in this debate (per se legality and per se illegality) and notes the nuances and difficulties that increase the possibility of erring in tying decisions. A key point he makes is that the antitrust problem must arise from an exclusion of a rival or a restraint of trade producing higher prices, not from the unwillingness of a seller to offer the number or size of products a consumer may wish to purchase.

The Colloquium on Media Plurality begins with Antonio Bavasso’s discussion of whether Europe’s regulatory regime—and more particularly the U.K.’s—requires a major overhaul in light of the increasingly blurred boundaries between traditional and new media. The article highlights a number of elements that regulation should consider in light of new technology and changing news consumption patterns, chiefly among them access and editorial neutrality. Rob Kenny focuses on the welfare effects of plurality interventions—those aimed at changing rules relating to the number of persons with control of media companies—and calls into question the merits of media ownership controls as changing consumption patterns (multi-sourcing) reduce the influence of any one provider. Our special article this issue is by David Evans who argues that many online platforms that provide free services to businesses are likely to be subject to excessive litigation, which exposes them to small probabilities of catastrophic remedies. These platforms can attract millions of business users and are exposed to antitrust complaints in part because of their economic importance in multiple jurisdictions. If even a tiny fraction of these businesses pursue complaints these platforms can be subjected to extensive investigations and court cases and face risks of false positive decisions against them.

The issue concludes with our Classic, Michael Whinston’s article, Tying, Foreclosure, and Exclusion. Eliana Garcés-Tolón provides an introductory essay describing how Whinston’s analysis helped move antitrust away from judgments, no longer relying on a “strong presumption” of foreclosure but looking at evidence of anticompetitive harm.

We hope you delve into the papers that comprise our 2012 Autumn CPI Journal and enjoy this lively and thought provoking debate among experts.

Elisa V. Mariscal

President and Editor-in-Chief, Competition Policy International

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