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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

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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