Competition Law Innovation

iPhone and Antitrust Implications: US vs EU vs India


To continue our fascination with the iPhone (see Aysha’s earlier post), I picked up an interesting news item pertaining to the antitrust implications of Apple’s exclusive deal with AT&A (Cingular).

If this issue cropped up in Europe, I could bet a thousand horses that the EC Commission will be far more likely to clamp down on the deal and hold that the “exclusivity” agreement between Apple and AT&T violates EU competition law norms. The EC is much more intrusive than any other competition authority that I know of—owing in large part to its “pro consumer” focus.

Unfortunately, in India, till such time as our bureaucratic and political bottlenecks clear up, we may not see the coming into force of the new competition regime. But it’s certainly worthwhile to reflect on this issue and see if the India’s Competition Act which has some provisions that are broadly similar to Article 81 and 82 of the EC code will be interpreted in a manner similar to cases in the EU. In other words, should we create an “efficiency” or business justification exception to the normal rule that exclusive agreements have a tendency to foreclose competition in the market and should therefore be voided. If we come down too strictly on exclusive tie up’s, would this hamper the rate at which innovative technology products are introduced in the market? Anyway, below are excerpts on the congress hearings:

“Congress’s iPhone hearing starts tomorrow.

Its official title is “Wireless Innovation and Consumer Protection,” but “Really, they’re the iPhone hearings,” says public interest lobbyist Ben Scott. The House Subcommittee on Telecommunications and the Internet is expected to consider the future of cellphone and wireless data communications, including the “unbundling” of cellphones from their carriers, while activists are pushing for a new wireless data network in newly-available spectrum. Both developments could ultimately affect AT&T’s exclusive carrier status with Apple.

“We need to unbundle phones,” according to Committee Chairman Ed Markey. He told The Street that “The consumer should be king and should be able to take their device with them, to whichever network provider is offering them a better deal… “

Wireless carriers find their phone and internet services facing new scrutiny after AT&T’s exclusive carrier deal with Apple’s iPhone. “Congress doesn’t need to run a hearing on whether the iPhone is the coolest, shiniest gadget on the market…” says Scott. “The reason they’re having a hearing is because the iPhone…is going to set the mold. This device and how it’s treated by the Congress and the regulators in Washington is going to determine how we access the internet from now on with every device that follows in the iPhone’s footsteps.”

Markey set the tone for the debate, telling The Street that “the more portable these devices are, the more innovation we’ll see.”

Adding juice to the debate is the upcoming release of new airwave spectrum in early 2008. Reed Hundt, former chairman of the FCC, notes news reports panning the iPhone’s internet service from AT&T as “pokey” and “excrutiatingly slow”. He’s calling for the creation of an open national data network, five times faster than AT&T’s EDGE, as part of the airwave auction — “a new, independent national, high-speed, fourth generation, wireless broadband network available to Steve Jobs and all other entrepreneurs at very low cost.” Noting this auction is “the last of its kind” — a one-time vacancy as TV stations switch over to a different digital spectrum — he warns that the carriers could launch a pre-emptive purchase to eliminate competition for a lifetime. In a nod to Apple, he calls his proposal “a great chance for the new FCC…to accomplish something insanely great. “

The current chairman of the FCC agreed yesterday – at least with the need for
an open network. “Whoever wins this spectrum has to provide [a] truly open broadband network…,” he told USA Today, “one that will open the door to a lot of innovative services for consumers.”

The same day the CEO of Working Assets continued its attack on the “closed network” model behind AT&T’s exclusive iPhone deal. “Perhaps unfairly, we tend to think of the consumers of Apple products as being a bit more progressive than those who stick to the Microsoft world. We think that they should know that their use of the iPhone will enrich and entrench precisely those forces that are seeking to eliminate the very soul of the internet.”

It’s a unique moment in time, argues blogger Matt Stoller. “Right now, there are a few confluent events that are inspiring a lot of debate around the public airwaves, and it all hinges on the iPhone and its immense significance.” To inspire a discussion, he’s recorded a five-minute video presentation by public interest lobbyist Ben Scott.”

Shamnad Basheer

Shamnad Basheer

Prof (Dr) Shamnad Basheer founded SpicyIP in 2005. He is currently the Honorary Research Chair of IP Law at Nirma University and a visiting professor of law at the National Law School (NLS), Bangalore. He is also the Founder of IDIA, a project to train underprivileged students for admissions to the leading law schools. He served for two years as an expert on the IP global advisory council (GAC) of the World Economic Forum (WEF). In 2015, he received the Infosys Prize in Humanities in 2015 for his work on legal education and on democratising the discourse around intellectual property law and policy. The jury was headed by Nobel laureate, Prof Amartya Sen. Professional History: After graduating from the NLS, Bangalore Professor Basheer joinedAnand and Anand, one of India’s leading IP firms. He went on to head their telecommunication and technology practice and was rated by the IFLR as a leading technology lawyer. He left for the University of Oxford to pursue post-graduate studies, completing the BCL, MPhil and DPhil as a Wellcome Trust scholar. His first academic appointment was at the George Washington University Law School, where he served as the Frank H Marks Visiting Associate Professor of IP Law. He then relocated to India in 2008 to take up the MHRD Chaired Professorship in IP Law at WB NUJS, a leading Indian law school. Prof Basheer has published widely and his articles have won awards, including those instituted by ATRIP and the Stanford Technology Law Review. He is consulted widely by the government, industry, international organisations and civil society on a variety of IP issues. He also serves on several government committees.

5 comments.

  1. Avatarmedicherla.ravi

    product locking does indeed take place in india ( one big gsm service provider and both the cdma providers do that(though slowly cdma sim card enabled hand sets are being introduced by both),as well as both the dth providers do that).
    moves beyond similar provisions,are the need of the hour and will definitely help not only the customer but also businesses!btw some time back steve jobs was saying that ipod will be unlocked from itunes, provided the music compnies agree…

    Reply
  2. AvatarWind

    Law Student

    It is obvious that Apple will get a big fine from the Commission by having these exlusive selling arangements within the EU. Of course Apple has good econimists an lawyers that have allready calculated out the very good result Apple will make by having the exlusive operator deals.

    Reply
  3. AvatarShamnad Basheer

    Dear Ravi, Aysha and Wind,

    thanks very much for your comments. I’d really be interested in seeing what happens if such a situation arose in the EU. Note the recent ruling of the CFI upholding EC finding that Microsoft commits an antitrust abuse by not sharing interoperability information and for “tying” Windows media player with the OS

    Reply

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