Wednesday, July 24, 2019

In response to Qualcomm's motion to stay FTC's antitrust remedies, industry body says DOJ antitrust chief has "aspirational policy positions"

Over the course of the last 14 months, U.S. Antitrust AAG (Assistant Attorney General) Makan Delrahim has been mentioned here on half a dozen occasions, most of which were directly--and some of them at least indirectly--related to his tireless advoacy on his former client Qualcomm's behalf (1, 2, 3, 4, 5, and 6). In the second one of those posts, I quoted an article (PDF) according to which Mr. Delrahim's positions "lack legal support" and are simply "out of sync with a large and growing body of US case law" on such issues as injunctive relief and FRAND royalty rates.

In an amicus curiae brief filed last week to support the FTC's opposition to Qualcomm's motion to stay the enforcement of antitrust remedies, ACT | The App Association described that lack of legal support and desynchronization with case law as follows:

"[...] Mr. Delrahim expressly desires to change Supreme Court precedent, whereas the district court and this Court are required to apply existing law. Notably, AG Barr, in sworn testimony to the FTC, has also voiced views and 'theories' contrary to Mr. Delrahim's aspirational policy positions." (emphasis in original)

That's a diplomatic way of saying that the man who is often referred to as "U.S. antitrust chief" (though the Federal Trade Commission is safely outside his sphere of influence, which is why he's resorting to amicus briefs) has an agenda of swimming against the judicial tide in the FRAND/SEP context.

Not only is Mr. Delrahim at loggerheads with the case law but most industry players disagree with him. ACT says in its filing that "[t]he companies and associations that have joined [ACT | The App Association] in efforts to curtail SEP abuses represent over $100B annually in R&D spending across a range of industries, own hundreds of thousands of patents (including SEPs), employ 50 million+ Americans, and contribute trillions of dollars to annual U.S. GDP." (emphasis in original)

As to Mr. Delrahim allegedly "expressly desir[ing] to change Supreme Court precedent," I've looked up the speech ACT is referring to. What he said is a bit more nuanced. He argued that the Supreme Court "has not yet commented on [a particular] issue," though he did concede that "[i]n a handful of cases, the U.S. Supreme Court has recognized that there can be antitrust liability for collusive activity that manipulates the standard-setting process to gain an advantage over rivals," and "recognizes that concerted action among implementers or innovators at the same level of the supply chain could constitute an antitrust violation." But, in general, ACT is right that Mr. Delrahim's approach to SEP-related legal questions is that he'd rather make new law than just live with the existing one.

Not only in this context but generally speaking, the ACT's filing complement and reinforces the FTC's opposition brief to Qualcomm's motion, lodged with the Ninth Circuit after an endeavor to the same end failed in Judge Koh's court, for an enforcement stay. Where the FTC stays true to its low-key tone, the ACT is far more combative and directly points the appeals courts to some striking contradiction and inconsistencies between what Qualcomm and its amicis are saying now and what Qualcomm has said and done before, including that "[Qualcomm] even sued a rival chipmaker for breach of FRAND based on the rival's refusal to license [Qualcomm]." (emphasis in original) The ACT brief also notes that Qualcomm Technology Licensing's current president, Alex Rogers, said the following more than a decade ago (he was a vice president at the time): "Saying [Qualcomm] refuse[s] to license competitors is like saying McDonald's refuses to sell hamburgers [...] It's nuts. It's crazy."

With respect to the public interest, Qualcomm's allegations of irreparable harm, and the strategic interests of an amicus like Ericsson, the ACT brief is direct and forceful where the FTC is rather low-key. When it comes to the merits, however, the FTC's brief does a really great job defending Judge Lucy H. Koh's ruling. In a recent post I already took the position that it doesn't make sense that a refusal to deal can only constitute an antitrust violation if it's bad for short-term profitability. The FTC cites to a Third Circuit decision, ZF Meritor LLC v. Eaton Corporation, that explains this very well. Let me quote that one more extensively than the FTC (facing page limits) did, but not without pointing out that the specific context here was exclusive dealing, which is also an issue in the FTC v. Qualcomm case but not relevant to the motion for an enforcement stay:

"Although the Supreme Court has created a safe harbor for above-cost discounting, it has not established a per se rule of non-liability under the antitrust laws for all contractual practices that involve above-cost pricing. See Cascade Health Solutions v. PeaceHealth, [...] (9th Cir. 2007) (stating that the Supreme Court's predatory pricing decisions have not 'go[ne] so far as to hold that in every case in which a plaintiff challenges low prices as exclusionary conduct[,] the plaintiff must prove that those prices were below cost'). Nothing in the case law suggests, nor would it be sound policy to hold, that above-cost prices render an otherwise unlawful exclusive dealing agreement lawful. We decline to impose such an unduly simplistic and mechanical rule because to do so would place a significant portion of anticompetitive conduct outside the reach of the antitrust laws without adequate justification.

"'[T]he means of illicit exclusion, like the means of legitimate competition, are myriad.' Microsoft, [...] ('Anticompetitive conduct can come in too many different forms, and is too dependent on context, for any court or commentator ever to have enumerated all the varieties.') [...]"

Qualcomm has the right to file an optional reply brief, and I guess it will. At that point, or on some other occasion should there surprisingly be no reply brief, I'll go into more detail on some of the theories. Below please find the FTC filing as well as the ACT's high-energy and high-value amicus brief:

19-07-18 FTC Opposition to ... by Florian Mueller on Scribd

19-07-19 ACT the App Associ... by Florian Mueller on Scribd

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