# Presentation: 025274

## Remedies for Monopolization

**Tad Lipsky**
**Washington, D.C.**
**March 28, 2007**

## Essential Facilities and Mandatory Access

- No Sense Pretending
- If the “essential facility” and “inability to duplicate” elements of the EFD are met, a classic declining-cost  situation is likely presented
- The viability of any and every regulatory alternative becomes debatable – including “do nothing”
- Likely EFD flaw – lack of capacity could be marker for benefits of intervention
- Essential IP – where “inability to duplicate” is imposed by IP law, antitrust intervention is in tension with reward rationale

## Essential Facilities and Mandatory Access

- Access Remedies – Costs and Complications
- Complexities of access pricing
- Concepts and measurements debatable – return, cost, *etc.*
- Endless evasion possibilities
- Reluctance to build capacity and make it available
- Reluctance to offer and transact
- Reluctance to install, repair, etc.
- Sacrifices economies of integration
- Specific problems of administration through judicial/executive consent-decree enforcement
- Strategic behavior – litigate rather than innovate

## Essential Facilities and Access Remedies

*Nevertheless . . . *
- Mandatory access has benefits and deserves consideration
- Can access be dealt with through an established regulatory mechanism?
*United States v. Terminal Railroad *(1911) (ICC)
*United States v. AT&T *(1982) (FCC)
- But see *United States v. Otter Tail Power *(1973) (FPC lacked authority to impose access obligation at the time)
- Is access already defined by commercial practice?
*Gamco v. Providence Fruit & Produce Building *(1952)
*United States v. Associated Press *(1945)
- Are there likely dynamic efficiencies?
*United States v. AT&T *– necessary for mobile/IP/broadband?

## Institutional Aspects of Antitrust Remedies

- The Need for Speed
- Identified sound goals are essential to success
*United States v. IBM Corp.*
- Expanding/shifting theories and questionable procedural approach doomed possibility of much narrower but quickly successful case
*United States v. Microsoft Corp.*
- Per-processor license phase: complaint to decree in one year (not counting FTC phase) – provides flexibility and minimizes error cost
- Broader “platform software” phase: lessons complicated by shifts in theory/remedy fit and procedural developments
*United States v. Western Electric Co./AT&T Co.*
- Theories shifted from long-lines to equipment to local monopoly
- Ultimately, coherent approach suggested workable remedy

## Institutional Aspects of Antitrust Remedies

- Legislative Role
- A perennial challenge where economic regulation is concerned
- Administrative Regulation Role
- Reflection of the legislative challenge – unclear mandate means incoherent regulation
- Executive Role
- Traditionally somewhat better directed in terms of policy coherence
- Not immune from distractions and other agendas
- Judicial Role
- Capacity for targeted change under specific conditions
- Not immune from weaknesses of administrative regulation, distractions and other agendas

## Conclusions

- Successful antitrust case must have three characteristics
- Legally sound
- Based on sound economics
- Identifiable remedy that is both capable of effective administration and likely to improve consumer welfare
- Identifying good candidates for structural cases
- Importance
- Long-term performance issues
- Balanced assessment of policy alternatives – do nothing, apply antitrust, “other”