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IBM, Google and the Others Recent art. 102 developments in the technology sector

IBM, Google and the Others Recent art. 102 developments in the technology sector. Lorenzo Coppi III Annual Conference on Recent Developments in Competition Enforcement Rome, 6 May 2001. Roadmap.

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IBM, Google and the Others Recent art. 102 developments in the technology sector

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  1. IBM, Google and the OthersRecent art. 102 developments in the technology sector Lorenzo Coppi III Annual Conference on Recent Developments in Competition Enforcement Rome, 6 May 2001

  2. Roadmap • Recent (and less recent) art. 102 investigations by the European Commission in the technology sector • The case in favour of close scrutiny of the sector • The case against close scrutiny of the sector • Conclusions

  3. IBM • Art. 102 investigation opened in July 2010 • Alleged tying of mainframe OS and hardware • Alleged refusal to supply licences to mainframe OS

  4. Google • Art. 102 investigation opened in November 2010 • Alleged discrimination in the ranking of search results • Other alleged discriminatory and exclusionary practices • “Search neutrality”?

  5. The Others • May 2009 – fined on Intel for conditional discounts • Nov 2009 – dropped investigation of Qualcomm’s CDMA licenses • Dec 2009 – accepted commitments on Rambus’s DRAM licenses • Dec 2009 – accepted commitments on Microsoft’s Internet Explorer tie/integration with Windows • Sep 2010 – dropped investigation on Apple’s iPhone warranties and app development tools, after change in Apple’s policy • More cases in the pipeline?

  6. Antitrust focus on technology sector? • Cases and policy statements, on both side of the Atlantic • Important sector for the economy • Does this mean that it deserves more scrutiny? • Schumpeter vs. Arrow

  7. The case for close scrutiny • Concentrated markets • R&D-intensity and concentration (Cohen & Levin 1989; Sutton 1998) • Tend to tip to monopoly • Network effects (Katz & Shapiro 1985; Farrell & Saloner 1985) • 2-sided markets (Rochet & Tirole 2003) • Interconnected markets (or “ecosystems”) • Complementarity and cooperation (Moore 1996) • Substitutability and interoperability (Shapiro & Varian 1999) • Conclusion: sector populated by dominant companies that can easily exclude other companies in their ecosystem

  8. The case against close scrutiny • Market power is transitory in the technology sector • Limited harm (Pleatsikis & Teece 2001) • Difficult to address (Easterbrook 1984) • Curbing market power chills innovation • Creative destruction (Schumpeter 1942) • Risk of type I errors (Schmalensee 2000) • Conclusion: the market will self-correct and any market power is temporary and necessary to drive innovation

  9. An opinion • Schumpeter vs. Arrow – unresolved debate • Strong tendency to concentration • Possible leadership persistence • Ample scope for foreclosure • Complicated analysis - not a valid excuse • Conclusion: close scrutiny probably appropriate

  10. Thank you Dr. Lorenzo Coppi Compass Lexecon, London & Brussels -- College of Europe, Bruges lcoppi@compasslexecon.com

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