About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

39 Fla. St. U. L. Rev. 681 (2011-2012)
Anticompetitive Product Design in the New Economy

handle is hein.journals/flsulr39 and id is 697 raw text is: ANTICOMPETITIVE PRODUCT DESIGN IN THE NEW ECONOMY JOHN M. NEWMAN* ABSTRACT Claims alleging anticompetitive product design and redesign lie at the very core of one of antitrust law's most challenging dilemmas: the intersection between innovation and regu- lation, invention and intervention. For over three decades, courts and scholars have strug- gled to determine the proper analytical framework within which to address such cases. Meanwhile, the very industries in which challenged conduct occurs have been undergoing fundamental changes. As demonstrated by the ongoing and recent antitrust litigation involving high- technology firms Apple, Intel, and Microsoft, distinctive features characterize most product markets in what has been called the 'Wew Economy'--and what increasingly has become simply the economy. Many of these features not only uniquely incentivize anticompetitive, design-related conduct but also render such conduct uniquely susceptible to antitrust scru- tiny. Accordingly, this Article both supplies a proper understanding of code-based product markets and, perhaps more importantly, provides a structured, efficient, and rational meth- od for analyzing design-related conduct in those markets. I. INTRODU CTION ................................................................................................ 682 II. TECHNOLOGY-INTENSIVE AND CODE-BASED PRODUCT MARKETS ................... 685 A. The Operation of the Markets: Stable Network Markets, Innovation-Based Rivalry, or Both? ........................................................... 688 1. Network M arkets and Effects ............................................................... 688 (a) Positive Network Externalities ..................................................... 688 (b) The Side Effects of Network Markets ......................................... 689 2. Innovation-Based Rivalry .................................................................... 691 B. Antitrust Harm in Code-Based Product Markets ...................................... 693 III. ANTICOMPETITIVE PRODUCT (RE)DESIGN IN CODE-BASED PRODUCT M ARKETS ............................................................................................. 695 A. Design and Redesign: Computer Programming and Software Updating. 695 1. The Nature of Computer Code and the Products It Underlies ............. 695 2. Redesigning Code-Based Products ....................................................... 697 3. The Apple iPod iThnes Antitrust Litigation ........................................ 697 (a) The Audio-File M arket ................................................................. 698 (b) Apple Closes the Network ............................................................. 699 B. Software Updates as a Uniquely Attractive Method of Using Product Redesign to Foreclose Rivals ...................................................................... 703 1. Relatively Low Design-Related Costs to Firms: Lower Ci Incentivizes Anticompetitive Product Redesigns ..................................................... 705 (a) Low Development Costs Relative to Physical Product Redesign.. 705 (b) Speed, Ease, and Low Costs to Firms of Online Software-Update Distribution ....................................................... 706 2. Relatively Low Risk That Consumers Will Reject Redesigns: How Lower R Further Incentivizes Anticompetitive Product Redesigns ..... 707 (a) Relatively Low Cost to Consumers Lowers R ............................... 708 (b) The Trend Toward Automatic Software Updates ........................ 708 * Trial Attorney, U.S. Department of Justice, Antitrust Division. The views ex- pressed herein are solely those of the author and do not necessarily reflect those of the Department of Justice. I owe an enormous debt of gratitude to Professor Herbert Hovenkamp for his invaluable expertise and insight. Finally, for participating in what must have seemed like innumerable discussions of this paper, I am grateful to Andrew Tran, Bryan Sullivan, and Rachel Howard.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most