Exclusionary Conduct

Sen. Klobuchar has proposed a new law titled the “Anticompetitive Exclusionary Conduct Prevention Act of 2020.” [PDF of Bill]

The key provision is as follows:

It shall be unlawful for a person, acting alone or in concert with other persons, to engage in exclusionary conduct that presents an appreciable risk of harming competition.

Here, exclusionary conduct is defined as conduct that disadvantages “actual or potential competitors” or “tends to foreclose or limit the opportunity of 1 or more actual or potential competitors to compete.”  For companies our groups with large market share, we assume that if they undertake exclusionary conduct then it will harm competition unless the procompetitive benefits are proven.

The bill is interesting in that it has a small caveat for securing and enforcing intellectual property rights:

Applying for or enforcing a patent, trademark, or copyright, unless such applications or enforcement actions are baseless or made in bad faith, shall not alone constitute exclusionary conduct, but such actions may be considered as part of a course of conduct that constitutes exclusionary conduct.

Thus, under the provision, “good faith” enforcement actions would not – alone – be actionable, but could be combined with other activity to show that the patent holder injured competitors.

I don’t understand why the competitors can’t just eat together politely. 

 

17 thoughts on “Exclusionary Conduct

  1. 11

    Dennis, re your amusing question “I don’t understand why the competitors can’t just eat together politely.”
    I can’t help wondering how that is going to work out for you if your schools all close [like so many others] and you have two bored young red-haired competitive boys home eating together?

  2. 10

    Random common acts that could be used to demonstrate an actor is “engaging in exclusionary conduct” according to this bill:
    1) Harboring trade secrets (KFC, Coca Cola)
    2) Entering into an exclusive supplier agreement (most oil companies)
    3) Purchasing/launching a disruptive technology that would disrupt your competitors
    4) Entering into a settlement agreement for a patent suit where the alleged infringer agrees to stay out of the market for a certain period of time
    5) Creating a vertical supply chain that leads to a reduction in costs as compared to your competitors (e.g. Tesla, Amazon)
    6) Renting exclusive shelf space in your local Walmart/Target
    7) Signing a lease for commercial space in a strip mall that restricts the landlord from signing future leases for similar businesses
    8)

  3. 9

    If the “key provision” is accurately portrayed above, it’s so broadly written that it is likely often to be misapplied and will be difficult to prosecute—too vague.

  4. 8

    Eat or be eaten is the law of evolution. Evolution via selection is what drives innovation and fitness to an environment. Markets are a form of evolution.

    The problem is that markets don’t solve every human need and don’t correctly operate in every human condition, because the law of the jungle and the concept of civilization are sometimes in tension.

    What we need is some index or measure of where an unfettered market works, and is appropriate, and where markets are not mechanisms in line with the values of civilization.

    For instance, the “market” for emergency brain surgery can never be effective because the informational asymmetry, low number of transactions, and economic disproportion between the actors is simply too unbalanced. Likewise the “market” for F-35 fighters or clean air can never actually function without intentional manipulation of the external environment.

    Economic activity should have some kind of measure of amenability to market forces, and when that measure is high, government should stay out of the way, and when it’s low, capitalism should be set aside.

    1. 8.1

      Over here in Europe, there is some anxiety about drug companies seeing no profit in developing new antibiotics (where effectiveness depends on NOT over-prescribing them). It’s a valid concern, Right?

      1. 8.1.1

        … and then?

    2. 8.2

      the law of the jungle and the concept of civilization are sometimes in tension.

      Some have confused ‘free market’ AS the law of the jungle, or a completely unregulated market.

      This has never been the case. Capitalism — as understood to be employed in a Free Market — has always had some constraints.

      Whether or not or government should “stay out of the way” is already set in the form of the government.

      Talk of ‘effective market’ and ‘setting Capitalism aside’ here by Marty is nothing more than his confused and self-made up notions.

      There is no real thing called “unfettered market.” All markets carry some “intentional manipulation of the external environment.”

      As Marty has never taken the time to truly understand the terrain of patent law, he continues to attempt to fight battles on the terrain that he does not know.

      He likely does not know (and cannot recognize) that my post at 3 below already covers his views.

  5. 7

    There is actually a lot more in the Bill (both enlightening AND puzzling).

    Take for example this slap across the face of the Judicial Branch at page 3:

    (10) antitrust enforcement against anticompetitive exclusionary conduct has been impeded when courts have declined to rigorously examine the facts in favor of inaccurate economic assumptions that are inconsistent with contemporary economic learning, such as presuming that market power is not durable and can be expected to self-correct, that monopolies drive innovation, that above-cost pricing cannot harm competition, and other flawed assumptions;

    Notwithstanding this slap, there are MANY things in the Bill that are excessively ham-fisted.

  6. 6

    Exclusive contracts would appear to run afoul of the good Senators proposal, so a whole bunch of folks are going to say “WHAT???!!”

  7. 5

    The problem is that the Scotus eviscerated the Sherman Anti-Trust Act with the “rule of reason,” which is similar to Alice in permitting the fact finder to do whatever they please.

    Go back to fundamentals. Adding stuff on top isn’t going to help. It just creates more work for lawyers and more barriers for small companies.

  8. 4

    I don’t understand. The very purpose of everything a competitor does is to “harm” the competition. The shareholders, the masters of every corporation, will not be satisfied with anything from their servant that falls short of disadvantaging the competition.

    What to do though, for a voter that wants to stop “exclusionary conduct”? Ban competition? Ban corporations? In the Bill, for the purposes of the Bill, and nothing else, define the ordinary everyday word “harm” in narrow terms? Nonsense, right?

    Laugh the Bill out of The Congress? After all, what is it, other than yet another virtue signal? MM, what do you say?

    1. 4.1

      “The very purpose of everything a competitor does is to ‘harm’ the competition.” Incorrect. The goal is to make money. Harm to competitors is merely a possible consequence.

      1. 4.1.1

        NS II,

        Barking up the wrong tree.

        Again.

        You are of course incorrect as to harming competition merely being a possible consequence.

        You clearly have never been a manager on the business side of the world, and clearly have no clue as to what you are saying.

  9. 3

    Set strong patent rights and get the F out of the way.

    Convolutions such as the K mess are just not needed.

  10. 2

    Shades of the 1936 anti-A&P “Wholesale Grocers Protection Act,” better known as the Robinson-Patman Act? [Has that unpopular anti-trust law even been actively enforced lately? Like against Amazon?]
    Also, would this even address complaints that giant software [including social media] companies are further enlarging market share or preventing competition by BUYING new software companies or technologies? Does that fit under this “exclusionary conduct?”

  11. 1

    Oh, great.

    Just what our country needs.

    Yet another legal morass for the courts and who knows who else to flail in for the next 10+ years . . . until SCOTUS — as with “abstract” — declines to define and set the legal boundaries for, “exclusionary conduct.”

    1. 1.1

      Exactly. What a joke.

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