- 133 Years Young: Sherman Act Section Two Keeps Up With Big Tech
- Antitrust Restoration From California Anchored By a New Monopolization Synthesis
- California Should Amend the Cartwright Act To Address Single-firm Monopolization
- Competition Beyond Rivalry: Adapting Antitrust Merger Review To Address Market Realties
- Dormant Commerce Clause: a Potential Brake On State Antitrust Legislation
- Executive Committee
- Message From the Advisors
- Message From the Editor
- Restrictions On Worker Mobility and the Need For Stronger Policies On Anticompetitive Employment Contract Provisions
- Should California Adopt Revisions Proposed By Congress and the New York State Legislature To Address Single-firm Conduct?
- Table of Contents
- Technological Monopolies, Innovation, and the Personal Freedom To Form Businesses: Like Oil and Water?
- The Adaptable Antitrust Laws
- The Risks of Requiring California-specific Merger Approvals
- Updating the Cartwright Act For the Twenty-first Century: Allowing Antitrust Claims For Unilateral Conduct
- Why Has California Waited So Long To Enact Its Own Merger Review Law?
- Over-prescription Is Bad Medicine: the Case Against a Knee-jerk Revision of Antitrust Injury
OVER-PRESCRIPTION IS BAD MEDICINE: THE CASE AGAINST A KNEE-JERK REVISION OF ANTITRUST INJURY
By Beatriz Mejia, Dee Bansal, Alexander J. Kasner1
The California Law Revision Commission seeks to evaluate whether California’s laws should be revised to include a statutory analog akin to Section 2 of the Sherman Act.2 They should not. More regulation is unnecessary and even counterproductive, introducing uncertainty into California competition law. There are plenty of tools under California law already available to police potentially bad behavior by monopolists. For example, California’s Unfair Competition Law provides a remedy for consumers to seek redress for acts unlawful under Section 2 of the Sherman Act. Indeed, the California Supreme Court has made clear that the "unfair" act or practice prong of the UCL covers "conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws business its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition."3 Adding an additional provision to California’s law to cover what is already actionable creates unnecessary confusion, duplicate liability, and the potential for gamesmanship.
But should California revise its law to add such a provision, it should be careful to both guard against a myopic understanding of antitrust injury and creating liability that only applies to one industry or type of business. Specifically, it should decline to revise the law to create a different "analysis of antitrust injury" in the context of "technology companies" that explicitly credits "competitive benefits such as innovation" and the "personal freedom of individuals to start their own businesses."4
There are several issues with such an approach. As an initial matter, it would create an "exception" that would swallow the rule: Nearly every modern company is a technology company.5 Defining by statute a class of technology companies that is subject to a different conception of antitrust injury would create uncertainty, be largely unpredictable, and likely prove unenforceable.6
Moreover, technology companies are not static and will continue to evolve. Trying to tailor the antitrust laws to the current state of technology will require repeated revisions as technology evolves, making the antitrust laws subject to antiquation. Technology companies do not require a new vocabulary. The antitrust laws are already written to allow for adaptation to new ways of competition, emerging technologies and industries. Certainly, the sparse language of the Sherman Act, which California follows, leaves substantial interpretative power to the courts, and allows for the evaluation of how antitrust law applies in new contexts. Modern technology is just the latest area in which we must endeavor to assess competitive harm.
Further, whether by intention or accident, expressly crediting the individual freedom to start businesses as a priority when assessing antitrust injury would appear to depart from the long-established focus on consumers, rather than competitors. By emphasizing values such as individuals’ "personal freedom" to start competing businesses, the proposal shifts the focus of California competition law from consumers to competitors, and to an overly generalized notion of fairness. Yet there is little reason to depart from the bedrock consumer welfare standard because that standard already promotes the necessary conditions for healthy competition.
To be sure, the most obvious and identifiable competitive harm is increased prices to consumers. But price fluctuations are not the only cognizable harm under the Sherman Act and California law. Increased innovation, for instance, is already credited in antitrust injury jurisprudence, along with quality of service, consumer choice, and output.7As a result, antitrust law has already effectively addressed anticompetitive questions that recur in the technology industry: harms to innovation; harms to suppliers (including in labor markets); and anticompetitive conduct involving products sold for zero monetary price. Moreover, recent cases out of the U.S. Court of Appeals for the Ninth Circuit and Northern District of California demonstrate how federal law’s approach to technology companies can accurately assess antitrust injury without resorting to novel frameworks.
Creating statutory duplication and industry-specific carve outs misreads the tools available under current antitrust law and creates problems where none exist. Instead, there is far more promise in continuing to refine the application of the existing antitrust laws to the challenges of new industries such as technology markets and digital platforms.
II. ANTITRUST INJURY IN THE CONTEXT OF TECHNOLOGY COMPANIES AND DIGITAL PLATFORMS
The current understanding of antitrust injury reflects a broad range of concerns—higher prices, of course, but also lower quality of products, fewer choices available to consumers, and decreased innovation. Technology companies and digital platforms consistently make these tradeoffs, and for good reason: App markets set minimum standards that balance consumer choice with quality of offerings, to guard against spam, harassment, and privacy violations. Digital companies may wish to favor long-term innovation, which may mean a short-term increase in consumer prices. And the multi-player nature of digital ecosystems may mean balancing the interests of multiple categories of consumer, complicating a price-focused assessment of consumer welfare.
Antitrust injury under California law "is analyzed under the same general framework as federal law."8And the latter has already adopted a workable standard for antitrust injury in the context of technology companies—a holistic approach to consumers, benefits, and harms that avoids unnecessary fixation on price fluctuations. California law should continue to reflect this flexible and adaptable approach, buttressed by the additional California-specific protections of Business and Professions Code sections 16600 and 17200 that provide further consumer protections.
A. RECOMMITTING TO CONSUMERS WHEN ASSESSING ANTITRUST INJURY
A statute which redefines antitrust injury to focus on, among other aims, the promotion of small businesses, and only in the context of the technology industry, is a departure from the current consumer welfare approach. This is an unjustified departure—the proposed statute does nothing to address its implicit critiques of the consumer welfare standard or promote the interests of efficiency or innovation.
1. THE PROPOSAL’S DEVIATION FROM PLACING CONSUMERS AT THE CENTER
An antitrust claim requires an antitrust injury—the type of harm to competition that the antitrust laws were designed to prevent. Anticompetitive harm has long been understood to put consumers at the center: "reduction of competition does not invoke the Sherman Act until it harms consumer welfare."9Indeed, not every harm resulting from the sharp elbows of the marketplace is anticompetitive. The consumer welfare test is fundamentally inclusive, because consumer preferences are likewise varied. As a result, as far as federal antitrust law is concerned, the consumer-welfare standard is not limited to whether prices rise or outputs increase. It rather encompasses both "the maximization of wealth or consumer want satisfaction."10 Indeed, the pro-consumer standard is designed to promote efficiency and innovation, namely, the introduction of new products and services from companies big and small alike.
A statute that would define antitrust injury as conduct that restricts "the personal freedom of individuals to start their own businesses" is fundamentally more focused on competing businesses rather than consumers.11 But this artificial leveling of the playing field credits businesses with no consideration of their merit or value to consumers. Indeed, some would argue that such a policy "is likely to protect higher cost or less innovative competitors, many of whom may be smaller."12 And, such an approach would depart from the axiom that the purpose of the antitrust laws "is not to protect businesses from the working of the market; it is to protect the public from the failure of the market."13
2. SHIFTING FOCUS FROM THE CONSUMER WELFARE TO OTHER AIMS IS NO SOLUTION
Whether one agrees with the consumer welfare standard for assessing antitrust injury, the statutory carveout at issue does not solve for the critiques of the consumer welfare standard. At the outset, it is not clear why the statutory aim of, say, fostering new business is a goal in search of an antitrust aid.14 Instead, California could, for example, employ economic incentives to encourage new market entrants rather than dictating the contour of markets by statute.
Moreover, antitrust injury doctrine already considers potential restrictions on innovation. Therefore, adding such regulation serves no additional purpose and may, in fact, cause confusion as to which innovations to credit—those of new entrants or those of the incumbent firms. Certainly, consumers (not legislators) are best positioned to make that judgment.
Moreover, the consumer-focused standard works just as well for technology companies or innovative industries as it does for other sectors. While there may be an increasing concern that the technology industry is driven by a few Big Tech goliaths, as a recent White House Executive Order has noted, this is not a unique concern in the technology industry—the healthcare, financial services, and agriculture sectors likewise have large players.15 A statutory carveout for technology is not merited merely because some of its participants are particularly well known.16 Moreover, nowadays, it is hard to find any company that does not consider itself a technology company. Nor are such companies stagnant. In this context, it is hard to imagine the value of rigid statutory guidance.
Another common criticism that may be driving the Commission’s proposal is "that [consumer welfare]-driven antitrust cannot address problems
of platform innovation."17 But this "is wrong: both conceptually and as a matter of law."18 The consumer welfare standard can and does take account of innovation—consumers stand to "benefit from high output, high quality, competitive prices, and unrestrained innovation."19 The challenge posed by innovation is not that it is ignored by the consumer welfare standard, but that it is always going to be difficult to quantify and establish, no matter the standard.20 Changing the legal framework without addressing that challenge is merely a surface-level non-solution.
An additional concern may be that the consumer welfare standard does not adequately address anticompetitive conduct in "zero-price" markets—where a seller does not charge a price for a service. These "zero-price" goods are particularly common in the technology industry; social networks, web-based email, online search, and mapping programs are all ostensibly "free."21 The consumer welfare standard’s focus on price changes is, at first glance, a poor fit for zero-price goods.22
But many of these zero-price goods are not, in fact, free.23 For example, in platform markets such as "search and social networking" the "free" product is in exchange for user resources: "time, attention, and personal data."24 Calculating "price increases" may be more complicated in these circumstances, but it is by no means impossible. And as a practical matter, courts have repeatedly dealt with antitrust cases involving zero-price technology markets without shying away from their challenges. In cases involving, for instance, exclusive dealing, predatory pricing, and refusals to deal, courts have "encouragingly" done more than "mere ‘hand waiving’ when confronted by zero prices" in technology markets.25 And in doing so, courts have shown that the traditional antitrust framework is up to the challenge of zero-price markets—"squarely confront[ing] the unique issues presented by zero prices" and beginning "the process of modernization."26
Moreover, the Commission’s proposed revision does nothing to address the challenges of zero-price markets. Requiring adjudicators to consider "innovation," "personal freedom to start . . . businesses," and "raise[d] prices" doubles down on price myopia while focusing on factors that have little to do with the zero-price markets.
B. EMBRACING A HOLISTIC APPROACH TO ANTITRUST INJURY
The current approach to antitrust injury embraces several different outcomes consistent with a pro-consumer focus—lower prices, higher quality of products, differentiated choices available to consumers, and increased innovation. And it also recognizes that tradeoffs between those values are inevitable and consistent with competition.27Indeed, consumers stand to benefit where major competitors trade off those values in different ways: A healthy market contemplates both the bargain-bin and cutting-edge widget.
Digital platforms can and do reflect these tradeoffs fundamental to prioritizing consumers.28 And they likewise demonstrate that a narrow approach to antitrust injury that must reflect innovation is particularly inapt for technology companies. To the contrary, "with regard to digital platforms and other aspects of the digital economy, it has been shown repeatedly that the existing tools and principles of antitrust enforcement are sufficiently flexible to incorporate new economic understandings and to govern new forms of competition."29 And courts have likewise "proven capable of adapting antitrust standards for effective application to new business practices in light of developments in technology and industry structure."30
We explore three noteworthy examples below in which federal courts have adopted a nuanced approach to anticompetitive harm in assessing technology companies and digital platforms that readily assesses tradeoffs in consumer welfare without need for statutory revision or enumerated factors.
1. QUANTITY OF CHOICES VS. ECOSYSTEM QUALITY
Digital platforms, such as mobile application stores, demonstrate that prioritizing consumers may often place other values above the factors enumerated by the Commission’s proposal, namely purported decreases in price or increases in innovation. As an initial matter, such platforms are not unrestricted resources. Most are familiar, after all, with these platforms’ terms and conditions—a set of restrictions that dictate what type of content an app may display, how it might be formatted, or what security parameters it must have in place. "[U]nfettered app distribution" may serve to increase the sheer volume of consumer choice and promote a race to the bottom for the lowest prices or the highest rewards for consumers.31 But conditions which restrict what types of apps may pass through the door to platforms are not, standing on their own, anticompetitive; "limitation of consumer choice, in itself, does not amount to ‘antitrust injury.’"32 And for good reason. In setting and enforcing terms and conditions, platforms must make a fundamental tradeoff between choice and quality. And they do (and ought to) trade off these outcomes for several reasons, including ensuring minimum quality standards and promoting differentiated technology choices for consumers.
a. MINIMuM QUALITY STANDARDS
First, consumers expect to have a threshold degree of confidence that, when they enter a digital ecosystem, the products available meet a minimum quality standard. A digital platform’s "ability to decisively police the integrity of its platforms is without question a pressing public interest. In particular, the public has a strong interest in the integrity of [digital] platforms," their ability to guard against "abuses," and "protection of [their] users’ privacy."33
In multiple recent Northern District of California cases, courts have addressed this tradeoff between quantity of apps and digital ecosystem quality in the context of antitrust injury. And they have concluded that antitrust injury requires an assessment of the quality of outcomes. Most notably, in Coronavirus Reporter v. Apple Inc., the court considered (among other claims) a Sherman Act Section 2 claim brought by a handful of developers whose apps were rejected from the Apple App Store for failure to meet the platform’s guidelines.34 The rejection of their apps, posited plaintiffs, restricted consumer choice and resulted in broad harm to the economy.35Not only that, plaintiffs argued that Apple’s decision served to stifle "innovative applications."36 The court disagreed, holding that a review process which "necessarily injures competition by excluding a number of developers from launching apps on Apple’s App Store" is not "on its own sufficient to plead  antitrust injury."37 Instead, the court tacitly endorsed Apple’s articulation that antitrust injury requires "reduc[tion of] the net quality of transactions in a relevant market."38
The Coronavirus Reporter court’s decision underscores that any assessment of antitrust injury in a digital environment that does not include or diminishes quality as a key consideration is short sighted.
b. INTERBRAND COMPETITION
Second, beyond the basic quality threshold, the differing degree to which digital platforms trade-off between quantity and quality creates valuably differentiated products. As the district court noted in Epic, for instance, the Apple App Store adopts a "centralized app distribution and  walled-garden approach."39 This type of "curation" may well "differentiate it from other platforms," for instance, the Google Play Store. These different approaches "ultimately [increase] consumer choice."40 Rather than two digital ecosystems which mirror one another by favoring the quantity of app choices above all else, consumers can choose the environment that best suits their needs.41
What’s more, technology companies may elect different strategies when it comes to consumer digital privacy. While some consumers may place relatively little value on providing their data to technology companies, others may place a high
value and demand commensurate compensation in return. These different consumer preferences of digital data and privacy are tradeoffs that may differ among services to meet varied consumer demand. Serving this variety of consumer preferences may require altogether competing digital ecosystems that differently calibrate the tradeoff between price and privacy. And a dominant technology player may wish to cater to consumers that want a more robust set of data and privacy protections, who are unwilling to part with personal information even for high rewards or lower prices. Antitrust injury should reflect these complex preferences. A view of antitrust injury that requires companies and courts to mechanically prioritize specifically enumerated factors—price, innovation, and so forth—would result in a convergence of options (to the detriment of consumers). The result would be a diversity of choices in name only.
2. PRICE VS. INNOVATION
Any understanding of consumer welfare in the technology industry must account for "innovation competition."42 Indeed, "[i]nnovation provides a significant share of the consumer benefits associated with competition, particularly in the most dynamic industries."43 But innovation, valuable as it is, requires investment. "Particularly in innovative industries, such as those in which intellectual property assets are key, firms may have large, up-front fixed costs for research and development, and relatively small marginal costs of production."44As a result, consumers may necessarily experience short-term increases in price in order to gain the option of an innovative product (and possibly long-term reductions in price).45 What’s more, innovation is a competitive asset. The "innovation competition" in the digital economy thus means an increased emphasis on getting new products and services out at an increasingly breakneck pace.46
In technology industries, then, there is an inevitable tradeoff between lowering price and maximizing innovation, and even dominant market players must continue to compete for the next great consumer product. Antitrust injury must account for innovation; the only question is whether antitrust injury must explicitly enumerate innovation as a factor. And in practice, federal courts have been able to balance this antitrust-injury tradeoff without the need for enumeration or prioritization.
CollegeNET, Inc. v. Common Application, Inc. is instructive.47 There, the Ninth Circuit made clear that an approach to antitrust injury focused only on price will miss obvious anticompetitive behavior, particularly for digital companies. Plaintiff alleged that the Common Application had driven all major competitors out of the market, but it was unable to allege any anticompetitive pricing activity. The Ninth Circuit held this was not fatal on a motion to dismiss. A monopolist in the digital realm that deprives consumers of innovative services because it feels no pressure to innovate is antithetical to consumer welfare. This conclusion required no special solicitude for innovation. It simply recognized that technology markets will often implicate a more robust theory of quality, and that the deprivation of innovation is contrary to a fully competitive digital market.
3. PRICE AND CHOICE IN MULTI-SIDED MARKETS
Finally, the simplistic price-focused approach to antitrust injury makes vanishingly little sense in two-sided digital platforms. A "two-sided market is one that intermediates between at least two interdependent groups,"48 for the goal of "faciliat[ing] a single simultaneous transaction between participants."49 Two-sided markets are common: Newspapers connect readers to advertisers by selling advertising space. Credit cards bring together merchants and buyers by facilitating financing. But if antitrust injury is focused on "consumer" welfare, then two-sided markets naturally prompt the question: Which consumer’s welfare matters?
The Supreme Court, in Ohio v. American Express Co., answered: "both." More specifically, the Court ruled that higher prices for one side of a credit card transaction—merchants, in the form of higher transaction fees—were not anticompetitive.50Indeed, that Amex "historically charged higher
merchant fees than  competitors" was not anticompetitive but rather balanced by the fact that, "[o]n the other side of the market, Amex uses its higher merchant fees to offer its cardholders a more robust rewards program."51 To be clear, Amex "does not require a plaintiff to allege harm to participants on both sides of the market."52 Rather, as the Ninth Circuit has recently indicated, a multi-sided market requires an assessment of behavior "on the market as whole," to determine whether "a practice harming participants on one side of the market could outweigh the benefits to participants on the other."53
Unsurprisingly, technology companies commonly involve two (or more) players. And so an assessment of antitrust injury adds an additional wrinkle: We cannot assume that a practice which increases prices for the most colloquial customer is anticompetitive. Consider Herbert Hovenkamp’s discussion of Uber: "Uber charges higher ‘surge’ prices during rush hour. Is doing so an exercise of market power over passengers? After all, the price goes up, and costs are not obviously higher. Or is surge pricing simply meant to ration scarce drivers during a period of high demand?"54
Likewise, digital app stores are paradigmatic multi-sided markets—the platform brings together (1) app users, (2) app developers, and (3) digital advertisers. But that complexity does not change the inquiry: does the challenged behavior hurt consumers and competition on the whole? And multiple federal district courts have followed suit, holding that litigation against digital app markets must begin with a showing of antitrust injury that assesses benefits and harms to app consumers and digital advertisers alike.
In Coronavirus Reporter, the district court dismissed for failure to plead antitrust injury where plaintiff "ignore[d]" that the Apple App Store "serves a two-sided transaction market"—app developers and app consumers.55 As a result, an output restriction on one side of the market (i.e., guidelines which effectively prohibited certain apps) benefited the other side of the market (consumers receiving confidence in the functionality of products on the App Store). Likewise, in Reilly v. Apple Inc., the district court explained that a plaintiff’s "theory of antitrust injury" must affirmatively "apprehend [and] analyze the two-sided nature of the marketplace of transactions for apps."56 After all, "Apple’s App Store functions as an intermediary between the respective sides-app developers and end users." Indeed, the Reilly court raised this issue even though Apple "d[id] not advance this argument" in its motion to dismiss; instead, Reilly held that it was the plaintiff’s obligation to affirmatively "address the two-sided nature of the relevant market."57
Relying on an isolated restriction on output or increase in price to assess antitrust injury is ill-suited to evolving technology. In a two-sided market, such restrictions or increases may in fact be commonplace and pro-competitive. What’s more, the balancing act necessary to assess consumer welfare is already accomplished under the approach of federal courts. This holistic approach to antitrust injury is readily adaptable to technology companies and digital platforms without need for over-enumeration. It makes little sense, then, for California to adopt a standard for antitrust injury which specifically delineates that antitrust injury must account for price increases.
California law and antitrust doctrine already provide clear guideposts to protect consumer welfare using a nuanced and flexible approach, which can and has accounted for generations of industry and technology evolution. Indeed, as discussed above, courts have been more than up to the task of adapting traditional notions of antitrust injury to the complexities of technology companies, digital platforms, and mobile app stores. Creating a rigid statute mandating consideration of certain factors (innovation, new business) when assessing antitrust injury undercuts the adaptability of antitrust doctrine and, just as worryingly, removes fact-specific decision-making authority from judges and adjudicators best equipped to weigh competing interests. Over-prescription is poor medicine,
particularly for a doctrine that does not need to be cured.
1. Beatriz Mejia is a partner in the San Francisco office of Cooley LLP and serves as head of Cooley’s San Francisco business litigation practice. Dee Bansal is a partner in the Washington, D.C. office of Cooley LLP. Alexander J. Kasner is an associate in the Washington, D.C. office of Cooley LLP. The views expressed herein are solely those of the authors, who are responsible for the content, and do not necessarily represent the views of Cooley LLP.
2. The California Legislature’s specific question, delegated to the California Law Revision Commission for review, is "Whether the law should be revised to outlaw monopolies by single companies as outlawed by section 2 of the Sherman Act, as proposed in New York State’s ‘Twenty-First Century Anti-Trust Act’ and in the ‘Competition and Antitrust Law Enforcement Reform Act of 2021’ introduced in the United States Senate, or as outlawed in other jurisdictions." See Assem. Con. Res. 95, 2021-22 Reg. Sess. ch. 147 (Cal. 2022). Section 2 of the Sherman Act reads, "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony[.]" 15 U.S.C. § 2.
3. Cel-Tech Commc’ns., Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 187 (1999).
4. See Assem. Con. Res. 95, 2021-22 Reg. Sess. ch. 147 (Cal. 2022) (approving for student the question: "Whether the law should be revised in the context of technology companies so that analysis of antitrust injury in that setting reflects competitive benefits such as innovation and permitting the personal freedom of individuals to start their own businesses and not solely whether such monopolies act to raise prices.").
5. E.g., Theodore Kinni, Every Company Is a Tech Company and Tech Is No Longer an Industry, MIT Sloan Mgmt. Rev. (Sept. 1, 2016) (noting that major companies in technology spaces "regularly encompass everything from semiconductor factories to high-end retail stores to Hollywood-style production studios").
6. See, for instance, the American Economic Liberties Project’s letter to the California Law Review Commission from January 2023. Letter from Lee Hepner, Legal Counsel, Am. Econ. Liberties Project, and Pat Garofalo, Director State & Local Policy, Am. Econ. Liberties Project, to Brian Herbert, Executive Director, Cal. L. Rev. Comm’n (Jan. 18, 2023) [hereinafter Hepner & Garofalo letter], http://www.clrc.ca.gov/pub/2023/MM23-07s2.pdf.
7. "In reality, the consumer welfare approach to antitrust analysis already considers a variety of factors including, quality, variety, and, and innovation. Joshua D. Wright et al., Requiem for a Paradox: The Dubious Rise and Inevitable Fall of Hipster Antitrust, 51 Ariz. St. L. J. 293, 358 (2019). "[A]ny claims that the consumer welfare standard contains large gaps that allow harms to innovation that ultimately harms competition to go unchallenged is believed by the case." Id. at 360. For some of these case examples, see In re Microsoft Corp. Antitrust Litig., 127 F. Supp. 2d 702, 711 (D. Md. 2001) ("Since businesses compete through both lower prices and superior performance, a firm’s stifling of innovative products would cause antitrust injury."); United States v. Microsoft Corp., 87 F. Supp. 2d 30, 94-95, 103 (D.D.C. 2000) (crediting argument that defendant’s actions "deterred" competitor "from undertaking technical innovations," and reduced "competition [that] would have conduced to consumer choice and nurtured innovation").
8. Reilly v. Apple Inc., 578 F. Supp. 3d 1098, 1109 (N.D. Cal. 2022) (citing In re WellPoint, Inc. Out-of-Network "UCR" Rates Litig., 2013 WL 12130034, at *11 (C.D. Cal. July 19, 2013)); see also Flagship Theatres of Palm Desert, LLC v. Century Theatres, Inc., 198 Cal. App. 4th 1366, 1378 (2011) ("California case law holds that the requirement" of antitrust injury applied in federal antitrust cases "applies to Cartwright Act claims as well.").
9. Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995).
10. Douglas H. Ginsburg, Judge Bork, Consumer Welfare, and Antitrust Law, 31 Harv. J.L. & Pub. Pol’y 449, 450 (2008) (quoting Robert H. Bork, Legislative Intent and the Policy of the Sherman Act, 9 J.L. & Econ. 7 (1966)).
11. Assem. Con. Res. 95, 2021-22 Reg. Sess. ch. 147 (Cal. 2022) .
12. Herbert Hovenkamp & Fiona Scott Morton, The Life of Antitrust’s Consumer Welfare Model, Promarket (Apr. 10, 2023) , https://www.promarket.org/2023/04/10/the-life-of-antitrusts-consumer-welfare-model.
13. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993).
14. See generally Herbert J. Hovenkamp, Antitrust and Innovation: Where We Are and Where We Should Be Going, 77 Antitrust L.J. 749, 755 (2011) (noting that the antitrust injury doctrine was developed in the 1970s, in part, as a corrective to prior view that antitrust law should "protect small competitors at consumers’ expense and even condemn such practices precisely because they reduced costs").
15. "In over 75% of U.S. industries, a smaller number of large companies now control more of the business than they did twenty years ago. This is true across healthcare, financial services, agriculture and more." Press Release, The White House, Fact Sheet: Executive Order on Promoting Competition in the American Economy (July 9, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy.
16. See Hepner & Garofalo letter, supra note 6.
17. A. Douglas Melamed & Nicolas Petit, The Misguided Assault on the Consumer Welfare Standard in the Age of Platform Markets, 54 Rev. Indust. Org. 741, 752 (2019), https://link.springer.com/content/pdf/10.1007/s11151-019-09688-4#Fn31.
19. Hovenkamp & Morton, supra note 12.
20. Melamed & Petit, supra note 17 (describing the difficulty with crediting innovation as "not legal or conceptual" but "practical").
21. John M. Newman, Antitrust in Zero-Price Markets: Applications, 94 Wash. Univ. L. Rev. 49, 51 (2016).
22. E.g., Melamed & Petit, supra note 17.
23. Newman, supra note 21, at 51.
24. Melamed & Petit, supra note 17, at 754.
25. Newman, supra note 21, at 102; see also id. at 101 (citing cases regarding exclusive dealing); id. at 102 (citing cases regarding predatory pricing); id. at 106 (citing cases regarding refusals to deal).
26. Id. at 111.
27. See, e.g., Joshua D. Wright & Douglas H. Ginsburg, The Goals of Antitrust: Welfare Trumps Choice, 81 Fordham L. Rev. 2405, 2416 (2013).
28. For one such example, see Makan Delrahim, Deputy Assistant Att’y Gen. Antitrust Div., U.S., Dep’t of Just., Don’t Stop Believin’: Antitrust Enforcement in the Digital Era, Remarks at Booth School of Business, the University of Chicago (Apr. 19, 2018), https://www.justice.gov/opa/speech/file/1054766/download (recognizing the "antitrust consensus" in the "digital world" continues to reflect the "consumer welfare standard" as the "lodestar of antitrust enforcement").
29. Proposals to Strengthen the Antitrust Laws and Restore Competition Online Before the H. Judiciary Comm. Subcomm. on Antitrust, Com. and Admin. Law (Oct. 1, 2020) (Statement of Abbott B. Lipsky, Jr., Assistant Professor, Antonin Scalia Law School), https://www.congress.gov/116/meeting/house/111072/witnesses/HHRG-116-JU05-Wstate-LipskyT-20201001.pdf. For another example, see Roger Alford, Deputy Assistant Att’y Gen. Antitrust Div., U.S. Dep’t of Just., The Role of Antitrust in Promoting Innovation, Presented at King’s College (Feb. 23, 2018), https://www.justice.gov/opa/speech/file/1038596/download ("[T]here is no reason to think that the lessons we have learned over the past several decades about the role of antitrust enforcement in protecting and respecting innovation do not apply to the digital marketplace. Quite the opposite: there is a strong case to be made that years of consistent application of antitrust law, with innovation as a key concern, fueled the growth of digital companies in the first place.").
30. Lipsky, supra note 29.
31. Epic Games, Inc. v. Apple Inc., 559 F. Supp. 3d 898, 1038 (N.D. Cal. 2021). Decreased choice as a proxy for decreased price competition is a common assumption in antitrust plaintiffs’ cases. E.g., Netafirm Irrigation, Inc. v. Jain Irrigation, Inc., No. 1:21-cv-00540, 2022 WL 2791201, at *1, *12 (E.D. Cal. July 15, 2022) (asserting restrictions on choice invariably lead to reduced price competition and higher prices); Brantley v. NBC Universal, Inc., No. CV 07-6101, 2008 WL 11338585, at *1 (C.D. Cal. 2008) (tying deprivation of consumer choice with inflated prices).
32. Somers v. Apple, Inc., 729 F.3d 953, 966 (9th Cir. 2013).
33. Stackla, Inc. v. Facebook Inc., No. 19-cv-05849, 2019 WL 4738288, at *6 (N.D. Cal. Sept. 27, 2019).
34. No. 21-cv-05567, 2021 WL 5936910, at *2, *4 (N.D. Cal. Nov. 30, 2021).
35. Id. at *14.
36. Id. at *1.
39. Epic Games, Inc. v. Apple Inc., 559 F. Supp. 3d 898, 1038 (N.D. Cal. 2021).
41. Platforms may very well get the tradeoff wrong and misjudge consumer preferences: Too restrictive of policies can underserve consumers’ interests. Too lax of enforcement can lead to hacks, spam, and privacy violations that earn consumers’ ire. But a mistake in calibrating the tradeoff between choice and quality is a business error, not anticompetitive conduct. That Microsoft may develop an operating system that is "particularly buggy and prone to crashes" may colloquially harm consumers, but "developing a bad version of Windows is not a monopolistic practice." Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 651 (4th ed. 2015).
42. Antitrust Modernization Comm’n, Report and Recommendations 41 (2007), https://govinfo.library.unt.edu/amc/report_recommendation/amc_fi nal_report.pdf.
43. Id. at 39.
44. Id. 40 & n.71.
45. "Antitrust policy toward markets with process innovation," for instance, "must recognize that short-run increases in price-cost margins provide incentives for invention and innovation. Short-run increases in price-cost margins make possible later reductions in prices that increase consumer welfare." Daniel F. Spulber, Antitrust and Innovation Competition, 11 J. Antitrust Enf’t 5, 31 (2023).
46. Id. at 40 & n.79.
47. 71 F. App’x 405 (9th Cir. 2017).
48. Herbert Hovenkamp, Antitrust and Platform Monopoly, 130 Yale L.J. 1952, 1968 (2021).
49. Ohio v. Am. Express Co., 138 S. Ct. 2274, 2286 (2018).
50. Id. at 2287.
51. Id. at 2288.
52. PLS.Com, LLC v. Nat’l Assoc. of Realtors, 32 F.4th 824, 839 (9th Cir. 2022).
54. Hovenkamp, supra note 48, at 1962. Hovenkamp draws from SC Innovations, Inc. v. Uber Technologies., Inc., No. 18-cv-07440, 2020 WL 2097611, at *3 (N.D. Cal. May 1, 2020), and Meyer v. Kalanick, 477 F. Supp. 3d 52, 57 (S.D.N.Y. 2020).
55. Coronavirus Reporter v. Apple Inc., No. 21-cv-05567, 2021 WL 5936910, at *14 (N.D. Cal. Nov. 30, 2021).
56. Reilly v. Apple Inc., 578 F. Supp. 3d 1098, 1111 n.3 (N.D. Cal. 2022).