Patently Absurd: Competition Corner by Alden Abbott

Issue #28

Hello again,

As the innovation race between the United States and China heats up, it has been rather absurd to see continued attacks on intellectual property and America’s world-leading innovation ecosystem from regulators, bureaucrats and politicians. Laws and policies designed to artificially lower costs for manufacturers and other patent implementers in leading high-tech sectors like automotives, pharmaceuticals, artificial intelligence, might hold populist appeal. But the long-term harm to consumers and the global leadership of the United States from weakening IP rights and deterring innovation cannot be understated. From the Biden administration’s unprecedented threats to ‘march-in’ and fix prices for inventions that emerge from public-private partnerships under the Bayh-Dole Act, to the increasing popularity of World Trade Organization (WTO) patent waivers that typically harm the rights of U.S. innovators to benefit vested interests in other countries, an urgent course correction is needed. All the while, Beijing continues to strengthen its own domestic patent system even as it tries to reduce the value of foreign patents. Undermining IP not only harms Americans through fewer economic opportunities and higher costs. It also costs lives by making it harder and costlier to bring life-saving technologies and drugs to U.S. and world markets.

That’s why I laid out the need for a new pro-patent and pro-growth innovation policy in the United States in my latest series of articles for Forbes, which include an outline of international threats to U.S. patents, as well as a roadmap for policy change to support U.S. innovation and prosperity going forward.

A conversation with FTC Commissioner, Andrew Ferguson

This month, I had the pleasure of hosting recently minted FTC Commissioner, Andrew Ferguson for a Mercatus Center webinar. We discussed a range of topics including his enforcement priorities at the FTC, his views on the consumer welfare standard, and more. Check out a recording of the event here.

Robinson-Patman Act

As my colleague Satya Marar and I previously discussed in an in-depth policy brief, the FTC and Biden administration’s plans to revive enforcement of the antiquated Robinson-Patman Act (RPA) anti-price discrimination law threaten ordinary American consumers from all walks of life with higher prices.

However, the RPA’s harms go even further. As Satya notes in his recent brief on populist antitrust’s threats to small business: “[D]uring the heyday of RPA lawsuits between 1961 and 1974, just 36 of the 564 companies cited in FTC complaints of RPA injury had annual sales greater than $100 million, and six in 10 of these firms had sales under $5 million. This indicates that small and medium-sized enterprises were the biggest casualties of the statute in the past and are likely to be so again should enforcement be revived. These firms face greater legal costs relative to their size than larger ones do, making them especially vulnerable to harm from protracted litigation.”

I also recently wrote about the implications of ongoing RPA investigations and the possibility of new cases from the competition agencies for Truth on the Market. In another article for Bloomberg, Mercatus Center chairman and George Mason University economics professor Tyler Cowen argues against the FTC’s purportedly upcoming prosecution of alcohol supplier Southern Glazer’s Wine and Spirits for violating the RPA by supplying products at lower prices to larger retailers than smaller ones.

Mergers & “Monopolies”

In assessing single firm conduct, antitrust jurisprudence has long recognized that monopolies maintained through superior business efficiency, innovation and acumen are not anti-competitive or harmful to consumers. Furthermore, as to business consolidations, many mergers stand to benefit consumers through lower costs, increased innovation, and even greater pressure on other firms in the market through creating a new, more powerful competitor. That’s why the FTC and DOJ’s moves to proscribe and increasingly scrutinize more mergers on the basis of purely theoretical harms is misguided, as I recently wrote for Forbes. I also recently wrote on the hurdles that the DOJ will face in their anti-monopolization case against ticketing giant Live Nation.

It was also great to have the opportunity to join several fellow FTC alumni in penning a joint letter to the FTC and DOJ antitrust division in response to their Request for Information on Corporate Consolidation Through Serial Acquisitions and Roll-Up Strategies (RFI). Though we commend the agencies for tackling the issues and investigating several acquisitions that merit further study, we also provide suggestions on how the agencies can supplement and amend the RFI to increase confidence in its comprehensiveness and objectivity.

That caps off another busy month for the competition team here at Mercatus. See you all next time.