Predatory Innovation: The Definite Need for Legal Recognition

Please cite the paper as:
Thibault Schrepel, (2017), Predatory Innovation: The Definite Need for Legal Recognition, World Economics Association (WEA) Conferences, No. 1 2017, Public Law and Economics, 1st June to 30th June, 2017

Abstract

In recent years, there has been an increasing interest in high-tech markets. The existing body of research on the topic suggests that such markets lead to reinterpret antitrust law key concepts – which should be done. There is little published literature, however, on the subject of the new anti- competitive strategies nestle in these markets, which this paper addressed.

It is widely recognized that the process of competition generally encourages companies to lower their prices, which benefits the consumer. And yet, in certain specific cases, antitrust rules intend to sanction predatory prices because they eliminate the competitive process itself. A similar situation applies to innovation. Innovation is one of the main bases for competition between companies and it is beneficial to consumers who may enjoy new products which are also better suited to their needs. But certain “innovative” behaviors are considered as being predatory and are punished accordingly, despite the fact that no legal concept specifically addresses this issue.

This absence of a legal category specifically dedicated to anti-competitive practices disguised as “innovation” leads judges to create numerous type I and II errors. The jurisprudence didn’t yet generalize the etiquette of “predatory innovation,” which nevertheless answers some of the modern problems encountered by antitrust law with high-tech markets development.

This article seeks to substantiate the value of this notion. Because many practices in high-tech markets are simultaneously occurring on several continents at once – the new version of software is generally available at the same moment around the world – we chose to carry out a comparative analysis between the United States and Europe. We are doing so because these two bodies of antitrust law may learn from each other – they have homologous roots – and also because the concerned countries have the highest GDP in the world.

The main objective of this paper, in the first instance, is to portray the practices that can and should be condemned as predatory innovation. And in fact, most predatory innovation practices are currently addressed under the label of “technological tying.” The creation of some legal rules dedicated to predatory innovation would lead to removing this legal concept and to create – instead – a more coherent legal regime – in both continents – that could be understood by business leaders.

3 comment

  • Maria Fernanda C Madi says:

    Dear Thibault Schrepel,
    Fist of all, congratulations for your work. The idea of proposing an independent/autonomous legal regime for an antitrust practice sounds great, but of course, ambitious.
    I understood your point and completely agreed that the practices so-called ‘predatory innovations’ should not be treated under the regime of general tying. However, I keep thinking/ it was not clear for me how this independent legal regime would be, meaning what would be the different characteristics of it. Why would it be so exclusive?
    You mentioned on pg. 28 that case-by-case analysis is still necessary in order to assess the criteria of predatory innovation, so it seams that case-by-case analysis will happen anyhow (with or without an independent legal regime). My main question for you is: wouldn’t it be enough to propose tools that facilitates the future analysis of competition authorities in case of predatory innovation, or even propose guidelines or remedies (soft-law) in case of abuse of those practices, rather than proposing an independent regime?
    Again, I am impressed with your work and looking forward to hearing your answer.
    Regards,

  • Angela Daly says:

    Hello,

    This was a nice piece to read.
    I had two main thoughts about it.

    1. I think it hints at a bigger issue in competition law and in law more generally: what do we mean when we talk about ‘innovation’? Innovation is, of course, not well-defined, but it seems to me that there are different ‘visions’ of innovation assumed by different areas of law (e.g. competition law vs intellectual property law) and even within one specific area, e.g. competition law, there is no good definition of what ‘innovation’ is, or what kind of innovation competition law should be promoting.

    2. I wonder if some of the problems caused by ‘predatory innovation’ which harm consumers might be better addressed by consumer law rather than competition law?

    Thanks,
    Angela

  • Samara Schuch says:

    Dear Thibault Schrepel,

    Congratulations for your paper! I have learned a lot reading it!

    Digital Markets transformed our society in such a way that I think Competition Law needs to be updated in order to deliver appropriate solutions to the new demands that are coming as a consequence of technology and internet. I also think that we might be aware of some cases in which digital companies that offer internet applications may take advantage of consumer’s data they collect to manipulate the market.

    In this sense, I propose some reflections about your paper and I would like to hear your opinion about, if it is possible.

    Do you think that having an independent legal regime for this matter in a global perspective is a good solution? Considering that Technology and Internet globalized commercial relations, it would be the case to propose a new “Lex Mercatoria” to contemplate anticompetitive behaviors on this matter and support all jurisdictions in the world?

    Moreover, it seems to be a complex problem the fact that some digital companies may have ways to hide their real intention behind a conduct that might be considered anticompetitive – what is aggravated by the fact that it is usually done “silently”. Do you think that it would be possible for authorities to create mechanisms to inspect or audit these companies in order to mitigate anticompetitive conducts? In addition, may laws impose higher sanctions for companies that hide such information from authorities?

    Thank you and I look forward to hearing your answer.

    Samara

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