The Essential Facilities Doctrine in Information Economies: Illustrating Why the Antitrust Duty to Deal is Still Necessary in the New EconomyMaxwell MeadowsNOTE - Fordham Intellectual Property, Media & Entertainment Law Journal
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The Essential Facilities Doctrine in Information Economies: Illustrating Why the Antitrust Duty to Deal is Still Necessary in the New Economy
Maxwell Meadows
NOTE

  The full text of this Note may be found by clicking the PDF link on the right.

 

 

INTRODUCTION

[T]

he modern economy involves far more commerce centered around the exchange of information than it did twenty years ago.1 Information is any collection of concepts or details about the operation of the world around us, and can help us to understand what we do, how we can do those things more efficiently, and lead us to discovering new possibilities. The growth in the rate of exchange of information over twenty years, and its utility for commerce, has been spurred by innovations in electronic communications and analysis, and in turn has spurred additional technological innovations. At times, information is the good placed into commerce,2 while at other times goods and services are offered so as to make use of information.3 The degree of competitiveness within different information-related markets differs widely—there are many manufacturers of smart phones, but relatively few social networks with large usership such as Facebook, Twitter, LinkedIn, Pinterest, and Google Plus.4

 

What distinguishes competition in a market infused with informational elements as opposed to physical goods, or services? Can information be controlled, even monopolized, by a single firm? In that same strain, when is information so unique, complex, or otherwise distinct that a potential competitor in its use cannot feasibly replicate it from another source or by independent effort? Assuming that information is not readily substitutable, and that such information is monopolized by a firm, can the information be called an essential facility or resource for competition in a marketplace?

 

An example of information that is subject to monopolization involves the use of pharmaceutical distribution agreements (and a related regulatory order from the FDA) to prevent potential competitors from acquiring the information about the drug necessary to know whether they can compete with a pharmaceutical manufacturer after filing an Abbreviated New Drug Application (ANDA).5 This case was recently bolstered by the filing of an amicus brief by the Federal Trade Commission in the United States District Court for the District of New Jersey.6 The plaintiff alleges that the defendant is using the FDA’s order and its distribution agreements to prevent potential generics from purchasing sufficient quantities to conduct bioequivalence testing.7 Hence, the defendant is restricting access to the information essential to filing an ANDA and permitting generic entry.8

 

Another framework supporting the potential monopolization of information that one should consider is the following: Firm “X” is a monopolist in the market for the provision of Internet service in a geographic region.9 As an Internet Service Provider (ISP), Firm X is able to gather certain information about its users such as age, demographics, wealth, and especially the amount and nature of Internet usage by each individual user. Assume next that Firm X uses the collected pool of information to create a new product or service, such as a personalized bulletin of regional events of interest that is generated from predictive analysis of the individual and aggregated data. Assume further that comparable products cannot be created absent a similarly detailed body of information about the pool of potential consumers. Last, assume that, apart from the provision of Internet services, there is no economically practicable method for obtaining the information about Internet users.

 

Under these numerous assumptions, the monopolist has exclusive access to a resource essential to competing in the new product market. Thus, by the economic fluke of being a legally sanctioned monopolist in one market, the monopolist has the building blocks for an independent second monopoly. If others had the ability to access and innovate from that foundation it is also possible that additional products or services could be devised from the information the monopolist is privy to. Is this reality simply a windfall for a monopolist, and if so, is there a mechanism under the antitrust laws to inject competition into the subsequent markets? Is antitrust intervention even necessary when measured against the economic incentive to sell access to the information at a monopoly price that extracts the same profits the monopolist could have made through its own exclusive use of the information?

 

Although the essential facilities doctrine, which grants a limited right of course to essential resources,10 is potentially the best situated antitrust theory to require access to information that could spur innovation, it is so narrowly defined under current antitrust law that one can question its existence.11 However, information economies have certain attributes that could reinvigorate the essential facilities doctrine.12 As such, even barring a relaxation of the necessary elements for an essential facilities claim, the essential facilities doctrine may find application in an information economy.13 Included in this discussion are a variety of economic and policy arguments for why a less stringent definition of the essential facilities doctrine might be beneficial in an information economy, as opposed to a more traditional economy.

 

The essential facilities doctrine from antitrust law can address this consideration and continue to foster competition in information economies, as well as encourage innovation based on the exchange of information or ability to exchange information. Part I will discuss what is considered to be an information economy and the characteristics that are attributable to information economies, while Part II of this Note will briefly summarize the essential facilities doctrine under current law. Part III of this Note will then discuss the application of the essential facilities doctrine to information economies, including how any distinguishing features of information economies should or do alter the essential facilities analysis. A brief conclusion on the utility of the essential facilities doctrine as applied to information economies is then included.

 


 

* Notes and Articles Editor, Fordham Intellectual Property, Media & Entertainment Law Journal, Volume XXV; J.D. Candidate, Fordham University School of Law, May 2015; B.A., Public Policy, and Economics, College of William and Mary, 2012. I would like to thank Professor Mark Patterson for his advice and guidance, Stephen Dixon and Kate Patton for their hard work, and my wife Katharine Deabler for her support.

 


  1. See Chuck Jones, Ecommerce Is Growing Nicely While Mcommerce Is On A Tear, Forbes (Oct. 2, 2013, 10:08 AM), http://www.forbes.com/sites/chuckjones/2013/10/02/ecommerce-is-growing-nicely-while-mcommerce-is-on-a-tear/ [http://perma.cc/Q6XE-4GGS].

  2. See, e.g., DC Denison, Big Data for Sale: Data Marketplaces, Acquia (Mar. 25, 2013), http://www.acquia.com/blog/big-data-sale-data-marketplaces [http://perma.cc/9CJC-583L] (describing public and proprietary data gathered and marketed by vendors such as DataMarket, Factual, Windows Azure Data Marketplace, ManyEyes, Public Data Explorer, Public Data Sets on AWS, and Infochimps).

  3. See, e.g., United Nations Conference On Trade And Development, Information Economy Report 2013: The Cloud Economy And Developing Countries xi (2013), available at http://unctad.org/en/PublicationsLibrary/ier2013_en.pdf [http://perma.cc/4NVM-7HCL] (defining cloud computing as “a paradigm for enabling network access to a scalable and elastic pool of shareable physical or virtual resources with on-demand selfservice provisioning and administration”).

  4. See, e.g., The eBusiness Guide, Top 15 Most Popular Social Networking Sites, eBizMBA, (Mar. 2015) http://www.ebizmba.com/articles/social-networking-websites [http://perma.cc/RF5L-MECC](on file with author) (indicating seven social networks exist with over 100,000,000 unique monthly visitors, with Facebook having three times the second-most popular, Twitter).

  5. See Brief for Federal Trade Commission as Amicus Curiae at 1, Mylan Pharms., Inc. v. Celgene Corp., (No. 2:14-CV-2094-ES-MAH (D.N.J.) (ongoing 2015), 2014 WL 2968348, at *1; see also Jonathan Hatch and Thomas W. Pippert, FTC Submits Amicus in Mylan v. Celgene, Citing Potential Refusal to Deal Concerns, Mondaq 2014 WLNR 25603756 (Sept. 16, 2014) (discussing the FTC’s amicus brief filed in support of plaintiffs in Mylan). There is presently an interlocutory appeal being considered in the Mylan case regarding whether a prior voluntary course of dealing is a necessary element of a refusal to deal claim under the antitrust laws. Mylan Pharmaceuticals, Inc. v. Celgene Corp., No. 14-2094 (ES)(MAH), 2015 WL 409655, at *2 (D.N.J. Jan. 30, 2015).

  6. See Brief for Federal Trade Commission as Amicus Curiae at 1, Mylan Pharms., Inc. v. Celgene Corp., (No. 2:14-CV-2094-ES-MAH (D.N.J.) (ongoing 2015), 2014 WL 2968348.

  7. See id. at *2.

  8. See id. Note that interlocutory appeal has been certified to the Third Circuit in this case on the question of whether a prior course of dealing is a required element for a Section Two refusal to deal. Mylan Pharms., Inc. v. Celgene Corp., No. 14-2094 (ES)(MAH), 2015 WL 409655 (D.N.J. Jan. 30, 2015) (letter order).

  9. Whether by regulatory decisions or a natural monopoly created by the high fixed costs of establishing a network of Internet distribution.

  10. See infra Part II.

  11. See, e.g., Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1074 (10th Cir. 2013) (“Essential facilities doctrine offers perhaps an even more controversial example still” of theories of liability for unilateral action.).

  12. See discussion infra Part III.A.

  13. See discussion infra Part III and Conclusion.

Note by

Maxwell Meadows*

Vol 25 Book 3

25 <span style="font-variant: small-caps;">Fordham Intell. Prop. Media & Ent. L.J.</span> 795

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