Antitrust:

How To Survive and Prosper In a Hostile Market and Judicial

Environment

Von.x Pre-Conference 17 March 2008 San Jose

17 March 2008 2

Panelists

• Glenn Manishin• Duane Morris LLP

• Mark Ostrau• Fenwick & West LLP

• Al Pfeiffer• Latham & Watkins LLP

• Harvey Saferstein• Mintz Levin et al. LLP

• David Turetsky• Dewey & LeBouef LLP

17 March 2008 3

Outline

• Price Squeeze Claims• Standards & Antitrust• VoIP, Broadband & Antitrust• Antitrust & Related Litigation• Some (Unanswered) Questions

17 March 2008 4

Price Squeeze Claims

Trinko, Covad, LinkLine and Beyond

(Al Pfeiffer)

17 March 2008 5

Basic Price-Squeeze TheoryKey Assumptions:• Incumbent controls key input

with no effective sub- stitutes• Incumbent charges entrant

more than its own input cost• Input costs result in raising

entrant’s total costs above retail price

• Equally (or more) efficient competitor excluded 0

10

20

30

40

50

60

Incumbent Entrant

Retail

Input

Total

17 March 2008 6

The Uncertain Impact of Trinko• Trinko did not deal directly with price

squeeze claims, but recognized broad right to refuse to deal altogether

• Price squeeze claims were recog-nized under pre-1996 Act antitrust law

• Has led to split among Circuit Courts, in a series of cases arising from DSL carriers’ claims against RBOCs

17 March 2008 7

The Covad Rulings

Covad v. Bell Atlantic398 F.3d 666 (D.C. 2005)407 F.3d 1220 (D.C. 2005)

• Rejected Covad’s price squeeze claim

• If incumbent can refuse to deal, it can price as it wants

• Predatory pricing claims still viable

Covad v. BellSouth374 F.3d 1044 (11th 2004)

• Price squeeze claims remain potentially viable after Trinko

• Upheld Covad’s price squeeze claim

• But found must be tied to predatory pricing by incumbent

17 March 2008 8

The LinkLine Ruling

• Distinguished between fully reg-ulated POTS markets and partially-deregulated DSL market

• Price squeeze claims are viable, even without showing predatory pricing

• Dissent: Predatory pricing should be required, but if shown, price squeeze claims viable

17 March 2008 9

Key Questions For Plaintiffs• Fight or Negotiate?

• Late ‘90s track record favors fighters• Public lawsuits may hurt investor confidence

• Can you file in the Ninth Circuit?• Can/should you allege predatory pricing,

as a backup?• Requirements of Rule 11

• How do you measure incumbent’s cost?

17 March 2008 10

Standards & Antitrust

Developing, Setting or Adopting Standards

(Mark Ostrau)

17 March 2008 11

Overview

• Generally pro-competitive: • Increased efficiency, interoperability, lower

barriers to entry • Facilitate comparisons, increase price

competition

• But numerous antitrust hazards:• Patent holdup • Excluding or injuring competitors• Limiting downstream competition

17 March 2008 12

What to Look For in an SDO/SSOMembership: Open, with multiple constit-uencies

Beware market power, exclusiveness, exclusivity

Process: Participatory, impartial, consensus-driven Beware bias, subjectivity, exclusionary result

Implementation: Voluntary, accessible, non-exclusive

IP rules: Clear disclosure obligations and RAND (or better) license rules

17 March 2008 13

Handling IP – Play Fair or Else Don’t fail to disclose relevant IP

Dell UNOCAL RambusDon’t violate license commitments

N-Data Qualcomm

Don’t mess up the pool “Non-essential” patents, exclusiv-ity, discrimination, noncompetes

17 March 2008 14

VoIP, Broadband & Antitrust

What Is ― or Should Be ― the Role of the Federal Trade

Commission?

(Harvey Saferstein)

17 March 2008 15

Overview

• Jurisdictional Issues ― FCC Regulation; Common Carrier Exclusion

• Antitrust• Consumer Protection

17 March 2008 16

The FTC & Consumer Protection

• Privacy Ventures ― Do Not Call List• Deceptive Billing and Advertis- ing

of Services• Telemarketing

17 March 2008 17

The FTC, Antitrust & Competition

• Merger Reviews, e.g., Time Warner• Bundling? Privacy?• Standards-Setting

17 March 2008 18

Antitrust & Related Litigation

Survival in a Hostile Market and Judicial Environment Requires Attentiveness to Every Opportunity

(David Turetsky)

17 March 2008 19

Achieving Business Objectives• Set goals and consider multiple and

complementary ways to achieve them. Consider:• Antitrust: Private litigation, mediation,

possible government enforcement interest?• Other theories: contract, tort, common law,

statutes• FCC proceedings, congressional interest

17 March 2008 20

Media and Content: Bundling and Access• FCC considering whether:

• programmers must sell each network separately to cable rather than in bundles

• cable must sell networks a la carte to customers or can sell in bundles or “tiers”

• Congressional committees have examined these issues and some have voted — against requiring a la carte

• Federal class action complaint under Sherman Act §§ 1 and 2 alleging anticompetitive bundling or

tying by programmers and cable

17 March 2008 21

Media Ownership Issues

• Cross-ownership rules — newspapers, TV stations, cable, etc.

• Congressional concerns — media concentration, diversity of voices, timing, etc.

• Third Circuit tossed out revised ownership rules

• Antitrust merger reviews

17 March 2008 22

Bottlenecks and Miscellaneous• FCC bans exclusive access by cable

providers to MDUs• Antitrust case on building access for CLEC

dismissed• The Twombly hurdle• What about MFN clauses as applied to

independent programmers?• Any different from “best terms” agreements

criticized as anticompetitive by EC in business insurance competition report?

17 March 2008 23

Some (Unanswered) Questions• Can successful price squeeze claims be

presented in real-world trials?• Will building barriers to entry with IP

claims/litigation be sustained absent “deception”?

• Does FTC “jurisdiction” present a Trinko limitation for suits about VoIP or broadband anticompetitive practices?

• Will digital content distribution face antitrust or regulatory constraints for competitive nondiscrimination?