The economy is booming under President Trump. Unemployment is low and the stock market continues to set new record highs. With the administration and lawmakers on Capitol Hill intent on reforming the tax code, America’s businesses should be on a path toward growth.
However, economic progress may be deterred by regulatory overreach here and abroad that will have a huge impact on the future of innovation and our economy. Regulatory bodies are supposed to make decisions in the public interest without overly encumbering legitimate business activity. Some U.S. trading partners, however, are using their antitrust laws inappropriately to advantage domestic companies over American businesses and even some American businesses over others.
Increasingly, foreign regulatory bodies abuse antitrust laws to aid domestic economic development and other objectives unrelated to antitrust protection. According to “The Strategic Abuse of the Antitrust Laws” report that is highlighted on the U.S. Department of Justice’s website, “firms are always vulnerable to lawsuits by the government… and the antitrust laws provide an important part of the environment in which strategy is formulated.”
In the Harvard Journal of Law and Technology, Acting Federal Trade Commission (FTC) Chairman Maureen Ohlhausen highlighted that “Some observers assert that influential jurisdictions appear to use their antitrust powers not to protect competition, but instead to regulate the price of patent rights. Such critics point to Qualcomm’s agreement to pay $975 million and to lower its royalty rates by more than a third to Chinese companies to end China’s antitrust investigation, as well as to the Korean Fair Trade Commission (KFTC) action to fine Qualcomm and force it to change its licensing practices.”
Another recent example is the KFTC investigation into Google on the basis that Google required Android smartphone makers to pre-load the company’s search engine onto their smartphones. However, the report noted that some argue this would have no impact on the Korean market, as Koreans prefer domestic search engines over Google. This puts into question if the investigation was truly based on antitrust concerns or if it was a way for the Korean government to prevent Google from competing in the Korean market.
These types of strategic actions by regulatory bodies against American companies undermine our patent system and deter investment back into important research and development (R&D) that make the United States a global innovation leader. According to a recent report commissioned by the U.S. Chamber of Commerce, “Because ‘unfairness’ and other subjective considerations (‘excessive size’ or ‘concentration,’ for example) may be invoked arbitrarily, business planning and investment are undermined. Commercial success may turn on political cronyism, rather than on the ability of a firm to efficiently provide the goods and services consumers desire at a competitive price (the result the consumer welfare approach to antitrust law is designed to foster).”
It is critical for the United States to identify and stop the harmful effects of the abuse of well-intentioned antitrust laws by antitrust agencies, if we want America to continue to lead in future modernizations such as 5G development. The first step is identifying and addressing the influence behind questionable decisions that aren’t founded on a strong legal basis. State-owned entities and other corporations — both U.S. and foreign — often attempt to influence the actions of antitrust agencies (known as “regulatory capture”) to attack their competitors, thereby cynically using the antitrust laws to stifle competition and increase their profits.
As one example, Qualcomm alleges Apple and Samsung have influenced the FTC lawsuit brought against Qualcomm, and have also encouraged foreign antitrust agencies to investigate and fine the company. In fact, the FTC’s controversial action against Qualcomm — prompting Acting Chairman Ohlhausen to issue an unusual dissent arguing forcefully the action lacked economic and evidentiary support — has emboldened antitrust regulators in China, Korea, and Taiwan to follow suit.
It is no coincidence these are all countries in which Apple and Samsung have a large footprint, and that both companies would benefit greatly if antitrust agencies in those countries force Qualcomm to charge less to license its cutting-edge technology. In Taiwan, one of the three commissioners who dissented from the Taiwan Fair Trade Commission’s ruling against Qualcomm highlighted that “to fine Qualcomm has become an international trend all of the sudden. For its conclusions to be compelling, however, a decision… should be made based on facts found, according to correct and feasible methods of analysis and evaluation of evidence.”
Indeed, if Qualcomm’s allegations against Apple and Samsung are true, it would be one of the biggest and most widespread cases of public “regulatory capture” in recent U.S. history.
America is in the perfect position to continue to lead in innovation and the advancement of new technologies that will grow the global economy. However, the misuse of antitrust laws by foreign regulators pushed by industry influence would be extremely detrimental to America’s leadership and innovation across the world.
Foreign antitrust agencies shouldn’t be used as a tool for competing businesses and countries to undermine the value of intellectual property. Instead, they should stick to their mission of protecting consumers from unfair and illegitimate businesses activities, which will ensure the continued growth of innovation and investment worldwide.
James Skyles is a Chicago-based intellectual property and business law attorney.