Global and Innovation-Based Competition Hearings

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Event Description

The FTC held hearings this fall to address whether there have been broad-based changes in the contemporary competitive environment that require any adjustments in antitrust and consumer protection enforcement in order to keep pace with those changes.

The core provisions of antitrust and consumer protection law serve as effective tools against the exercise of unrestrained private economic power and the deception and abuse of consumers. Enforcement that results in vigorous competition in domestic markets also best facilitates international competitiveness and advancements in innovation-driven industries. Nonetheless, some have argued that the globalization of the economy and the increasingly rapid rate of technological change are making certain aspects of antitrust an unnecessary impediment to the ability of U.S. companies to compete internationally. Concerns also have been expressed that antitrust needs to adjust to ensure that consumers are not the victims of new anticompetitive strategies available in innovation-driven markets.

To ascertain whether antitrust and consumer protection law will continue to protect the operation of the free market and unimpeded consumer choice, the FTC examined whether adaptations in the enforcement of those laws are warranted in light of changes in the nature of global and innovation-based competition.

To varying degrees, more rapid innovation, increased and more rapid communication among and within firms, the expansion of free markets, privatization of companies and industries, lower shipping costs, the greater tendency of firms to operate worldwide, deregulation and cost containment pressures have contributed to an increase in global competition and to transitions in the structures of particular industries. The FTC examined how these changes in the competitive environment have affected U.S. consumers and U.S. firms. In asking the public what areas of the antitrust and consumer protection laws deserve review, the FTC anticipated exploring:

  • Whether antitrust's traditional approach to defining a relevant market and measuring market power fully accounts for global competition.
  • Whether antitrust analysis can improve its ability to assess the likelihood of entry by foreign firms into particular markets.
  • Whether antitrust enforcers can improve how they define the scope of and measure market power in innovation markets, such as those involving research and development.
  • How antitrust can maximize the likelihood of realizing beneficial efficiencies and minimize the likelihood of injuring consumers from an increase in market power when agencies review mergers, joint ventures, or network-type operations that have apparent efficiencies. When should antitrust concerns with undue increases in market power trump claims of increased efficiency?
  • Whether antitrust enforcers should permit an otherwise illegal merger if the merger would significantly cut the costs or improve the quality and effectiveness of innovation efforts.
  • Whether U.S. merger analysis should revise its approach to corporate failure and distressed industry conditions. Would shareholders, creditors and workers be better off if agencies, in analyzing mergers, tried to facilitate the transition of salvageable firms to a stronger market position, particularly when the companies involved compete in foreign markets or face vigorous foreign competition in domestic markets?
  • Whether there are particular regulatory barriers that unduly impair the ability of small firms to compete in a global environment.
  • How antitrust analysis should balance the incentive to innovate that intellectual property protection creates with the disincentive to innovate that might occur if enforcers were to require a firm to provide access to its otherwise protected property (for example, when that property becomes the industry standard).
  • Whether networks, such as those in banking or computer systems, or de facto industry standards may foreclose competition in some circumstances and whether antitrust enforcement should protect the ability of competitors to access or benefit from another firm's network or standard.
  • Whether international consumer protection standards are needed to address the increase in fraud or consumer harm likely to stem from the burgeoning number of cross-border consumer transactions.
  • What institutional processes the FTC itself should adopt to better protect consumers and promote competition, given the realities of global competition and rapid innovation.

These hearings were devoted to assessing whether antitrust and consumer protection enforcement require adjustments in order to keep up with changes in competitive circumstances as we approach the 21st century. The central principles of antitrust and consumer protection law continue to ensure that competition is maintained and that consumers are provided with the truthful, nondeceptive information necessary to make informed choices. Indeed, there is general agreement that antitrust and consumer protection enforcement ensuring the preservation of vigorous competition in domestic markets best facilitates international competitiveness and advancements in innovation-driven industries. Questions have been raised, however, as to whether antitrust and consumer protection enforcement should make adjustments to account for changes in the nature of global and innovation-based competition.

The Commission examined its role in enforcing antitrust and consumer protection laws in light of the above issues. The Commission expected that the hearings will provide the information necessary to determine what, if any, adjustments may be desirable. It should be kept in mind that simply raising an issue does not indicate that any change is necessary or appropriate. Following the hearings, the Commission intended to issue a report, which may indicate changes it intends to adopt or areas for further study or coordinated action with the Department of Justice.

  1. What Changes in the Nature of Competition Have Taken Place, and What Changes in Antitrust or Consumer Protection Approaches Might Be Appropriate in Response?
  2. Are There Additional Market Definition Techniques That Might be Appropriate In Order to Account Fully for Global Competition and Innovation Concerns?
  3. How Should Antitrust Enforcers Assess the Likelihood of Entry in Light of Global Competition and Innovation Issues?
  4. Does Current U.S Antitrust Analysis Adequately Take Into Account Efficiencies in Merger and Nonmerger Areas in Light of Global Competition and Innovation?
  5. What Are The Merits and Demerits of the Current Antitrust Treatment of Failing Firms or Distressed Industries?
  6. Do Current Antitrust and Consumer Protection Regimes Operate So As Not to Impair Unnecessarily the Ability of Small Businesses to Compete in a Changing Global, Innovation-Based Economy?
  7. What Is the Optimal Relationship of Antitrust to Intellectual Property Law in Light of Global Competition and Innovation?
  8. How Should Antitrust Enforcers Assess Foreclosure, Access and Efficiency Issues Related to Networks and Standards?
  9. What Other Types of Strategic Conduct Are Possible in the Context of Innovation-Based Competition? How Should Antitrust Assess Such Conduct?
  10. What New Consumer Protection Issues Are Emerging In A Global, Innovation-Based Marketplace?
  11. What Institutional Processes Will Help the FTC To Attain Its Goals?

This agenda is a draft and has not received Commission approval.

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