United States Attorney General William Barr made headlines a few weeks ago when he announced the Department of Justice (DOJ) was actively investigating “Big Tech” over antitrust concerns. Pairing together “Big Tech” and “antitrust” is a veritable political Yahtzee these days, but the DOJ’s statements on antitrust are worth a closer look as their definition of which companies deserve such scrutiny depends on who is doing the investigating.
Just down the road at the Federal Trade Commission (FTC), the agency scored an impressive victory in a longstanding antitrust case against a tech giant notorious the world over for its forcing of competitors out of the market—Qualcomm. We’ve written extensively about the case and its implications for our members and vocally supported the FTC’s efforts. However, for all the media coverage on how big of a deal this case is for the parties involved and standards essential patents (SEP) licensing moving forward, DOJ is taking a curious (and unprecedented) position in opposing a federal judge’s findings of fact and law.
We’ve written extensively about the case and its implications for our members and vocally supported the FTC’s efforts. However, for all the media coverage on how big of a deal this case is for the parties involved and standards essential patents (SEP) licensing moving forward, DOJ is taking a curious (and unprecedented) position in opposing a federal judge’s findings of fact and law.
The DOJ’s reasons? First, Assistant Attorney General Makan Delrahim, who heads the antitrust division at DOJ, has made it clear through a seriesof speeches that he does not support the continued role of U.S. antitrust law in SEP licensing on fair, reasonable, and anti-discriminatory (FRAND) terms, and that, in effect, those who volunteer their patents to key technical standards on FRAND terms should not have to honor their promise. FRAND licensing supporters, including the App Association, do not disagree that SEP holders should receive reasonable compensation for their intellectual property. Where they differ is the pedestal companies like Qualcomm place their SEPs upon, believing that they can pick and choose whom they license to and under what financial terms despite the voluntary promises they already made to licensing on FRAND terms that the rest of the business community is relying on. FRAND advocates believe any and all negotiating for SEP licenses should occur on an even playing field no matter the size of the company or where they may sit in the supply chain.
If that sounds familiar, it is because that is often the logline for why the “Big Tech” companies should continue to innovate as they see fit without government intervention and let the market determine the victor. And yes, these are the same companies the DOJ is investigating for, “…hav[ing] achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.”
Second, we continue to be troubled by a dubious argument that Qualcomm must be able to continue business as usual in order to maintain U.S. leadership over China in the development of 5G. Qualcomm isn’t a Huawei competitor (for example, Qualcomm does not produce network infrastructure equipment), nor is it capable of becoming one. Qualcomm is an important player in the development of 5G standards, but it’s merely a component supplier and intellectual property licensor that designs modem chips for the rest of the industry. Qualcomm competes in a small portion of the potential 5G supply chain and has shown no interest in taking on anything more.
That’s why the DOJ’s intervention in FTC v. Qualcommis so troubling. The FTC and DOJ are well aware of their shared oversight of antitrust (for example, they have reportedly met to determine which one would investigate particular companies). And yet, the DOJ filed two briefs opposing both the (1) FTC’s enforcement case against Qualcomm and (2) the subsequent District Court findings in the FTC’s favor, and shows no signs of backing down. While this is happening, DOJ continues to cede global leadership on policy to promote innovation in standards and IP to other regulators, including those in Brussels and Beijing.
Fitting modern-day business into antitrust laws on the books since the days of Standard Oil is a difficult enough task requiring a deep examination of Congressional intent as well as what we define as competitive and consumer harm today. While such questions may be more difficult to answer with respect to “Big Tech,” over 20 years of bipartisan policy and case law support the FTC’s ongoing approach in its enforcement case against Qualcomm. DOJ’s choice to depart from the U.S. government’s approach to competition, standards, and IP has created an even murkier picture both domestically and globally, raising significant questions as to how it will approach “Big Tech” and whether such an investigation will disregard well-establish bipartisan antitrust principles and precedent.