How Commissioner Vestager's Mistaken Views on Standard-Essential Patents Illustrate Why President Trump Needs a Unified Policy on Antitrust and Innovation

Thirteen days after America elected Donald Trump its 45th president, Margrethe Vestager, the European Commissioner for Competition, spoke on antitrust’s role in policing a dominant firm’s “excessively high prices,” which of course do not constitute an antitrust offense in the United States. Her remarks revealed the erroneous factual premise of her views on standard-essential patents (SEPs). Commissioner Vestager credulously repeats an unidentified conjecture that the cumulative royalty for SEPs used in smartphones is $120, which is at least six times greater than what reliable empirical analysis finds the amount to be. She suggests that EU competition policy is so malleable as to permit intervention even when there are no reliable empirical data that she is willing to identify publicly in support of that conjecture. Antitrust lawyers on both sides of the Atlantic should not be surprised if President Trump rejects Commissioner Vestager’s vision of competition and innovation and consequently repudiates much of what has been the Obama administration’s vision as well. The Trump administration will surely be more concerned than the Obama administration was about the harm to dynamic efficiency from using antitrust policy to suppress royalties for SEPs. Steven Salop and Carl Shapiro have speculated about two potential approaches that President Trump might take with respect to antitrust enforcement. The first would be interventionist and have “the overarching goal of reducing the power of large corporations in the American economy.” The second would be “a highly permissive, minimalist approach to antitrust (outside of price fixing enforcement) of the type associated with Robert Bork and former Supreme Court Justice Antonin Scalia.” That Salop and Shapiro cannot envision a Trump administration capable of any greater nuance than these two approaches make one wonder whether they know anybody who knows anybody who voted for Trump. It is also telling that their high-level predictions about antitrust in the Trump administration promptly drill down specifically on, of all topics, SEPs. They claim that a “laissez-faire” approach to royalties for SEPs would lead to “potentially huge amounts of money... flow[ing] from ordinary consumers purchasing smartphones... to a small number of entities... that hold SEPs relating to smartphones.” Salop and Shapiro evidently stand with Commissioner Vestager. I doubt that President Trump will. The federal government lacks a unified strategy for promoting innovation and competition and for reducing the burden of economic regulation. President Trump might consider appointing one person to oversee the formulation and implementation of that unified strategy. The Antitrust Division and the Federal Trade Commission are best equipped to focus on established product markets. The agencies understandably try to insinuate themselves in competitive disputes in markets experiencing technological disruption. But the efficacy of such intervention is debatable. Moreover, public choice considerations should alert us to the possibility that the enforcement agencies are attracted to the technology sector precisely because that is where the economy is creating the largest amount of wealth. The danger of the agencies’ intervention — particularly if that intervention is so misinformed as Commissioner Vestager views on SEPs are — is that it will retard or dissipate the huge benefits of dynamic competition.