This morning, one of the authors of the iPhone paper I mentioned earlier this week defends his views against Gans’ comments. One thing about Dale’s defence struck me as interesting, and that was this:

Professor Gans correctly makes the point that Apple could try and obtain permission (technically, an exclusive dealing notification) from the ACCC. Actually obtaining that permission is not a given. I think that the ACCC might well object, which they can do if they are not satisfied that the public benefits of the third-line forcing would outweigh the public detriment, and I think that balance would be weighing against Apple.

Hmmm. Firstly, I’m not sure it’s correct to characterise notification as meaning the ACCC gives ‘permission’. In fact, my reading of the Act suggests that lodging a notification provides automatic immunity from the date it is lodged with the ACCC (or soon after in the case of third line forcing conduct) and remains in force unless revoked by the ACCC.

Secondly, while it is technically true that non-revocation by the ACCC is not a ‘given’, they’re not exactly in the business of revoking these things. The statistics to some extent speak for themselves. According to the ACCC’s 2006-2007 Annual Report, page 92:

  1. In 2006-2007, the ACCC received 694 new notifications, and revoked 2 (that’s a revocation rate of 0.3%). 9 were withdrawn by the notifier.
  2. In 2006-2006, the ACCC received 1099 new notifications, and revoked NONE (that’s a revocation rate of zero %). 6 were withdrawn by the notifier.

Also, in determining whether a notification should be revoked, the ACCC has to take into account whether the detriment caused by the arrangement outweighs the benefit. The ACCC’s guide to exclusive dealing notifications on page 8 records the ACCC’s view that “[t]he detriment will be more limited when potential buyers of [the iPhone] have alternative sources of supply for [the iPhone] or substitute products.” Surely, except to the most ardent Apple fanboy, there are numerous economic substitutes for the iPhone (as indeed Gans pointed out).

Again, IANACL (I am not a competition lawyer). But I’m not yet convinced of this one.

Update: Gans responds. And the discussion is ongoing over on CoreEcon in the comments to that thread.
Further update: Clapperton is also getting into the discussion.

The much anticipated judgment in the C7 matter has been handed down today…it’s a wopping 1230 pages/7MB. Get it here. In a very small nutshell, Channel 7 did not prove its pleaded case and was thus unsuccessful. The issue of costs is still to be worked out. His Honour Justice Sackville estimates costs in excess of $200million. The obiter on ‘mega-litigation’ will be especially useful to the readers of this blog who teach litigation and legal professional ethics.

Australia’s competition regulator, the ACCC, is taking Google to court, alleging that the search engine company has engaged in “misleading and deceptive conduct in relation to sponsored links that appeared on the Google website”, in contravention of section 52 of the Trade Practices Act 1974 (Cth).

Section 52(1) provides that a “corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

The ACCC has alleged that Google has engaged in misleading and deceptive conduct in breach of section 52 by:

–in 2005, providing sponsored links to online classified advertisement provider Trading Post‘s website, in the guise of hypertext links to two of Trading Post’s competitors (but associating the text with the Trading Post’s URL); and
–on a continuing basis, “failing to adequately distinguish sponsored links from “organic” search results”.

The ACCC has also alleged that Trading Post contravened sections 52 and 53(d) of the Act in 2005 when the names of their business competitors (car dealerships) appeared in the title of Google sponsored links to Trading Post’s website. (Section 53(d) prohibits a corporation from representing that it “has a sponsorship, approval or affiliation it does not have”.) (more…)

For the first time, the Court of First Instance has annuled the European Commission‘s approval of a company merger. In January 2004, Sony and BMG notified the Commission that they intended to merge their worldwide music recording businesses (except for Japan) into a joint venture. In July 2004 the Commission approved the joint venture in Europe, and SonyBMG started business.

This week, in an action brought against the Commission’s decision by Impala, an organisation representing 2,500 independent music publishing and record labels, the CFI ruled that the Commission had failed to satisfy the legal requirement that the combined music recording businesses of Sony and BMG would not come to hold monopoly power.

What this decision means for the joint venture is unclear–reports state that Sony and BMG will need to lodge a new notice, and the Commission will undertake a new analysis of the transaction. But the conclusion reached could be the same. If it is not, it will be interesting to see how a joint venture that has been operating for two years will be unravelled.

There is a very interesting article in The New York Times about Microsoft‘s current difficulties in releasing Vista–the successor to operating system Windows XP. It’s been five years since Windows XP was released. In the same time, Apple has been much more nimble in the operating system market, releasing four new versions of its operating system. Meanwhile, Windows users wait, as their systems run slower and slower.

So what is the problem? According to this article, the problem is at least in part Microsoft’s bundling strategy come back to bite. Windows is written for a range of devices–that takes a lot of code. Moreover, the approach towards coding has created a problem as well. When Apple released OS X, the program was a radical departure from the previous operating system. Using applications written to work with OS 9 involved booting up the old operating system separately. By contrast, Microsoft has decided to ensure compatibility, in which new versions of Windows can be used with applications written for old versions. But this functionality has resulted in an operating system that is difficult and complicated to update, and often awkward to use.

Microsoft is trying to do the right thing by its users. It seems, however, that more radical innovation has served Apple better in recent years–just take a look at its share price.

In a significant shift from its jurisprudence of the past forty years, the United States Supreme Court has rejected the presumption that a patent confers market power on the holder of that patent. In Illinois Tool Works Inc. v Independent Ink, Inc. (No. 04-1329, decided 1 March 2006), the Supreme Court concluded that since a patent does not necessarily confer market power, defendants in cases involving a tying arrangement must prove the existence of market power to bring an antitrust claim.

A possible implication of this case is that companies might be able to require customers to use the spare parts and supplies (car parts, toner cartridges etc.), designed and sold for use with their proprietary equipment, and prohibit the manufacture and sale of spare parts and supplies by third parties. (more…)

Earlier this month I posted Part 1 of “What is region coding?”, which described the technology, commercial rationale, and economic effects of this system. This posting is Part 2, and considers the legal implications of region coding, with a focus on developments in the United States and Australia. (more…)

The New York Times is reporting that Elliott Spizer’s office has served subpoenas on Universal Music, Sony, EMI and Warner Music as part of an investigation into whether the “four record companies that dominate the industry have violated antitrust laws in the pricing of songs that are sold by Internet music services”. (more…)

This edition of “What is…?” describes the regional coding systems used by the entertainment industry, with a particular emphasis on DVDs. This article will explain the technology behind region coding, describe how the system is enforced, and speculate on the commercial reasons for the system. It will then consider the economic effects of region coding and its possible legal implications, including a discussion of recent litigation in which region coding has been at issue.

This posting contains Part 1, which provides an introduction to how region coding works from both technological and legal perspectives, as well as the commercial justifications for region coding and its possible economic effects. Part 2 considers the legal issues raised by region coding, in the context of both competition/antitrust law as well as the anti-circumvention provisions that have been adopted as part of copyright law in both Australia and the United States. (more…)

It’s been a long time coming. The television and Internet industries are working together to offer consumers the ability to download, legally, movies and television episodes. This convergence might be seen as inevitable, particularly since the advent of TiVo, Foxtel iQ, and other services using digital video recording systems (DVRs), as well as the popularity of P2P file-sharing networks. These industry developments reflect an important influence: the power of consumer demand. (more…)