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Antitrust Law Is Alive and Well, Both Here and Abroad

Significant developments in the US and the European Union (EU) confirm that antitrust law is alive and well on both sides of the Atlantic.

A US Court of Appeals in the District of Columbia vacated a lower court order to break up Microsoft. Nevertheless, it determined Microsoft used certain license restrictions to maintain a monopoly for its operating system browser. On the other side of the Atlantic, however, for the first time, the EU scuttled a merger of two US-based businesses that had been approved by US antitrust authorities previously.

Both situations illustrate important considerations for members of the converting industry.

The Court hearing the appeal of the Microsoft case agreed with some of Microsoft's arguments on its technology-based industry but still found antitrust violations. The Court concluded that Microsoft's practice of tying its “browser” software into its Windows operating system should be reviewed again at the District Court level, but by a different judge.

The Microsoft case has led to a debate among legal and economic theorists: Does competition “for the market” in certain industries (where competition centers on investment in intellectual property) result in an inevitable “winner-take-all” circumstance, and should it, therefore, be evaluated using a different standard from that applied to price/output competition by existing players in traditional markets?

Microsoft's attorneys and economists argued competition for the “killer app” necessarily leads to market dominance. Since the court confirmed, in part, conclusions regarding anticompetitive behavior, independent private suits targeting Microsoft are possible.

Speculation continues on whether the case ultimately will settle on terms more favorable to Microsoft.

The EU's action in blocking General Electric's takeover of Honeywell a deal previously blessed by US antitrust authorities reflects a fundamental difference in philosophy between US and EU merger analysis. Typically, the US focuses heavily on the impact a particular merger will have on consumers, often looking at effects that are well downstream of the actual parties involved. In contrast, the EU focuses more closely on the impact on competitors. In this situation, the combined strengths of GE and Honeywell in the aerospace industry (and industries that serve the aerospace industry), and the impact on possible competitors, led the EU to refuse to approve the merger.

While some US government sources reacted angrily to the refusal to approve the GE/Honeywell deal, historically the US has applied its own antitrust laws to foreign companies (including applying criminal sanctions to price fixing and other alleged antitrust violations).

The two actions illustrate two key points. One is the importance of strategically coordinating all aspects of a merger review from both an EU and a US perspective. Competition authorities in both areas have often come to similar conclusions about mergers, resulting, for example, in disapprovals by both governments (with the EU acting first) of the proposed WorldCom/Sprint merger. In this global economy, though, different approaches between the US and EU on antitrust matters may result in different decisions.

The second point to consider is the importance of understanding new technologies, and the role of intellectual property, in antitrust situations, as well as the interplay between public and private enforcement options available in the US. Whether there is (or should be) a difference in how “old economy” versus “new economy” industries are evaluated likely will be fleshed out as the Microsoft case continues to progress through the US judicial system, whether or not new private suits are filed.

Converters, their suppliers, and their customers must remain vigilant about antitrust compliance and understand both existing and developing theories in this increasingly global economy.

Sheila A. Millar, a partner with Keller and Heckman LLP, counsels both corporate and association clients. Contact her at 202/434-4143; e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.; web site:

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