The technology industry is a significant driver of global economic growth, and fostering competition in this sector is a priority for competition authorities around the globe. Regulating competition in these markets is challenging because they are inherently complex and rapidly developing. In deciding whether to intervene, authorities must balance the concern that failure to act may allow a first mover to establish an entrenched monopoly position and eliminate competition with the concern that intervention may damage technological progress by unduly restricting activities at an early stage of market development.
Competition authorities dealt with several challenging cases in the technology sector last year, a number of which are still ongoing.
- The US Federal Trade Commission (FTC) settled with Intel, bringing an end to a number of alleged anti-competitive practices that the FTC considered were restricting competition in the market for central processing units. The case is significant because it combined monopolisation claims under Section 2 of the Sherman Act with unfair practices claims under the rarely used Section 5 of the FTC Act (for further information on the increasing use of Section 5, please see section 2 above).
- The European Commission opened formal proceedings against IBM (in relation to the market for mainframe computers) and Google (in relation to the online search and online advertising markets). At the national level, Google submitted commitments to resolve abuse of dominance concerns in France and Italy.
- The US Department of Justice (DOJ)’s ongoing investigation into price fixing in the liquid crystal display (LCD) industry has so far led to more than 20 executives and eight companies being charged, and more than $890m in criminal fines. The European Commission has also investigated a cartel in this industry, fining six LCD panel producers €648m in December 2010.
- The European Commission adopted its first settlement decision in a cartel case involving 10 producers of DRAM memory chips used in computers and servers, imposing total fines of €331m. For further information on the EU cartel settlement process, please see section 3 above.
- The FTC intervened in the business relationships between technology firms under Section 8 of the Clayton Act, which prohibits interlocking directorships between competing companies. Overlapping directorships are common in Silicon Valley. In 2009-10, the FTC raised concerns about three directors who were on the boards of both Google and either Apple or Amazon – all three resigned from one of the boards.
- Both the DOJ and the European Commission approved the proposed internet search and paid search advertising agreement between Microsoft and Yahoo without restrictions. The DOJ noted, however, that it would continue to monitor the industry closely.
- The FTC ended its investigation of Google’s acquisition of mobile advertising company AdMob, principally as a result of Apple’s decision to enter mobile advertising, which the FTC considered would lead to a significant change in the market’s competitive dynamics.
- Intel has recently offered behavioural remedies to the European Commission to address competition concerns over its proposed purchase of antivirus software company McAfee and a Phase I decision is due by 26 January 2011. Third parties are understood to have raised concerns that Intel could bundle its computer processor chip products with McAfee’s offerings. The transaction has already been approved by the FTC.
- The DOJ settled with seven Silicon Valley companies over allegations they had agreed not to poach each other’s staff in an attempt to suppress employee salaries.
- The European Commission indicated it would not open formal proceedings against Apple after the company agreed to change its warranty policy for the iPhone to allow cross-border repairs and relaxed its policy on the development of iPhone applications, allowing developers to use third party layers.
We can expect further enforcement action across the board in 2011, as competition authorities seek to ensure open networks, competitive prices and interoperability.