John E. Lopatka

Microsoft, Monopolization, and Network Externalities: Some Uses and Abuses of Economic Theory in Antitrust Decisionmaking

This article, published in 1995, analyzes the use of the concept of network externalities in the Antitrust Divisions first antitrust case against Microsoft. That case resulted in a consent decree that, among other things, prohibited Microsoft from imposing per processor licenses of its Windows operating system. The article challenges the claim that the practices at issue in the case were more likely to be harmful or long-lived because of the presence of network externalities in the market for computer operating systems.

Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion

In a recent lawsuit, the United States Department of Justice (DOJ) has alleged that Microsoft used illegal exclusionary practices in an effort to drive Netscape Corporations web browser from the market and thus to protect Microsofts monopoly over computer operating systems. To achieve these ends, according to the DOJ, Microsoft has unjustifiably bundled its Internet Explorer (IE) web browser with its Windows operating system and entered into unlawfully restrictive contracts with Internet firms. In the process it has allegedly prevented the evolution of Netscapes browser into a kind of meta-operating system that might compete with Windows. The case poses fundamental questions about the role of antitrust enforcement in technology markets, particularly those involving networks, and raises important doctrinal issues for law of monopolization, tying, and exclusive dealing. This article examines the antitrust issues raised by Microsoft in the light of economic analysis. It argues that, while Microsoft has a monopoly of operating systems, its integration of IE and Windows cannot be deemed inefficient by any practicable legal standard, and is not seriously exclusionary under standard antitrust criteria. In addition, the article argues that the Microsofts restrictive contracts with Internet firms have plausible efficiency justifications and do not impermissibly exclude Netscape.

Indirect Purchaser Suits and the Consumer Interest

This article, published in 2003, argues that indirect purchaser class actions under state antitrust law have failed to advance the consumer interest. They rarely provide significant compensation to those actually injured by anticompetitive overcharges, and there is little evidence that they provide better deterrence than suits by direct purchasers.

Antitrust and Sports Equipment Standards: Winners and Whiners

Sports governing bodies routinely adopt equipment standards because equipment can have a dramatic impact on performance. Standards and rules set in relation to human capacity define a sport. Because standards by nature are restrictive, equipment producers stand to lose if their products do not conform. Excluded producers sometimes challenge standards on antitrust grounds. This paper explores the economics of sports equipment standard setting and the merits of the antitrust challenge. It concludes that except in the rare case in which the governing body is itself a victim of a boycott, standard setting decisions should be lawful per se.

The Must-Carry Decisions: Bad Law, Bad Economics

In the Cable Act of 1992, Congress required cable television operators to carry specified numbers of local broadcast stations. Deeming these must-carry obligations content-neutral and thus subject to intermediate scrutiny, the Supreme Court ultimately held that they do not violate the First Amendment. The Court concluded that the legislation was designed primarily to protect stations from anticompetitive conduct by operators and secondarily to protect non-cable subscribers from the loss of viewing options brought about by other causes. This article proposes an explicitly economic paradigm for assessing the constitutionality of the must-carry rules. Applying this analysis, the authors argue that the perceived threat of anticompetitive conduct cannot justify the legislation and that the independent interest in station diversity provides only weak support for it.

Economic Expert Evidence: The Understandable and the “Huh?”

Expert economic evidence has become increasingly important in antitrust cases, largely because the Supreme Court in embracing certain strains of economic authority has adopted rules that make economic effects in individual cases decisive. Some economic evidence is accessible to antitrust decision makers, even if it is cognitively challenging. The danger posed by this kind of evidence, as Roger Blair has pointed out, is that witnesses will make assertions unsupported by theory. Traditional litigation devices can adequately address this danger. But economic analysis has become increasingly technical, and typical antitrust decision makers are incapable of understanding it. When decision makers confront information they do not understand, they avoid reaching decisions altogether or they use heuristic processing and peripheral cues, which results in bias and cognitive illusions. Neither reaction is desirable. Proposals for addressing the hazards of testimony that is not understood, including the increased use of court-appointed experts, are unsatisfactory. Perhaps some benefit can be had by encouraging more rigorous appellate review.

'Obvious' Consumer Harm in Antitrust Policy: The Chicago School, the Post-Chicago School, and the Courts

This book chapter, published in 2002, argues that courts decide antitrust cases based mainly on their perception of the “obvious” effects of the practices at issue on consumers. Courts must rely on both theory and evidence in resolving antitrust cases, but the persuasiveness of theoretical predictions depends in large part on the determinacy of their implications for consumers. Theories of liability are often too restrictive in their assumptions and markets are often too complex to allow confident predictions that a practice that obviously benefits consumers in the short run will ultimately hurt them in the long run, or vice versa.