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Re: Hey Terekhov: Wallace lost. Who'd guess.... ;)

From: Alexander Terekhov
Subject: Re: Hey Terekhov: Wallace lost. Who'd guess.... ;)
Date: Wed, 21 Jun 2006 22:10:02 +0200

Alexander Terekhov wrote:
> David Kastrup wrote:
> [...]
> > > That's all bullshit. The FSF simply managed to fool Judge Tinder
> > > that Wallace lacks standing.  Tinder recorgnized that "Plaintiff’s
> > > Third Amended Complaint States a Claim Upon Which Relief can be
> > > Granted" and that "Plaintiff’s Allegations Sufficiently Set Forth a
> > > Violation of the Rule of Reason", but he was fooled by FSF's "even
> > > if it were possible for Plaintiff to allege some harm to competition
> > > in the abstract, Plaintiff has not alleged antitrust injury to
> > > himself, and thus lacks standing."
> >
> > You have an interesting notion of "fooled".
> -----
> Accompanying Injury
> Supreme Court case law holds that predatory pricing may inflict
> antitrust injury on competitors (“Predatory pricing . . . is a
> practice that harms both competitors and competition.”) (Cargill, Inc.
> v. Monfort of Colorado, Inc., 479 U.S. 104, 118 (1986)); (“[i]n the
> context of pricing practices, only predatory pricing has the requisite
> anticompetitive effect”) (Atlantic Richfield Co. v. USA Petroleum Co.,
> 495 U.S. 328, 339 (1990)).
> The district court ruled, “Antitrust laws are for ‘the protection of
> competition, not competitors.’ Brunswick Corp. v. Pueblo Bowl-o-Mat,
> Inc., 429 U.S. 477, 488 (1977)” (ENTRY ON DEFENDANTS’ MOTIONS TO
> DISMISS at 3) but the Supreme Court clarified the Brunswick language
> in Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 353
> (1990):
> The "antitrust laws were enacted for `the protection of competition,
> not competitors.'" Ante, at 338 (quoting Brown Shoe Co. v. United
> States, 370 U.S. 294, 320 (1962)). This proposition - which is often
> used as a test of whether a violation of law occurred - cannot be
> read to deny all remedial actions by competitors. When competitors
> are injured by illicit agreements among their rivals rather than by
> the free play of market forces, the antitrust laws protect
> competitors precisely for the purpose of protecting competition.
> The Ninth Circuit addressed competitor status in American Ad
> Management, Inc. v. General Telephone Co. of California, 190 F.3d
> 1051, 1058 (9th Cir.1999):
> Further, it is not the status as a consumer or competitor that
> confers antitrust standing, but the relationship between the
> defendant's alleged unlawful conduct and the resulting harm to the
> plaintiff. See Amaral, 102 F.3d at 1508 ("Losses a competitor
> suffers as a result of predatory pricing is a form of antitrust
> injury because `predatory pricing has the requisite anticompetitive
> effect' against competitors.") (quoting ARCO, 495 U.S. at 339)).
> The leading Supreme Court case on predatory pricing under §1 of
> the Sherman Act is Matsushita Elec. Industrial Co. v. Zenith Radio,
> 475 US 574 (1986). (“This is a Sherman Act 1 case . . .”) (fn 8).
> Predatory pricing was defined in Matsushita. (“[(i)] pricing below
> the level necessary to sell their products, or (ii) pricing below
> some appropriate measure of cost.”) (fn 9).
> Judge Richard Posner has acknowledged the heavy fixed costs involved
> with the production of intellectual property:
> Intellectual property is characterized by heavy fixed costs relative
> to marginal costs. It is often very expensive to create, but once it
> is created the cost of making additional copies is low, dramatically
> so in the case of software, where it is only a slight overstatement
> to speak of marginal cost as zero. Antitrust in the New Economy,
> (Nov. 2000) U. Chicago Law & Economics, 1, 3,
> The Seventh Circuit examined a host of cost measures and found
> pricing below long run incremental cost (LRIC) as one appropriate
> indicator of predatory pricing. MCI Communications v. AT&T, 708 F.2d
> 1081, fn 59 (7th Cir. 1983).
> Regardless of whether the measure of cost is LRIC or some other
> appropriate formula, a final price of “no charge” leads to the
> absurd conclusion that the “heavy fixed costs” for developing
> intellectual property in computer programs are non-existent.
> The Supreme Court held that it might be that only “direct evidence”
> (Matsushita at fn 9) is sufficient to demonstrate below-cost
> pricing. A contract term fixing licensing fees at no charge is
> certainly “direct evidence” of pricing below long run incremental
> cost.
> Wallace in his Second Amended Complaint alleged:
> The Defendants' pooling and cross licensing of intellectual property
> with the described predatory price fixing scheme is foreclosing
> competition in the market for computer operating systems. Said
> predatory price-fixing scheme prevents Plaintiff Daniel Wallace from
> marketing his own computer operating system as a competitor.
> Wallace has certainly alleged an injury “of the type the antitrust
> laws were designed to prevent and that flows from that which makes
> defendants’ acts unlawful.”
> -----

And here's fooled (drunk in a sense) Judge Tinder:

"The allegation in the Fourth Amended Complaint that the GPL is
foreclosing Mr.Wallace from entering into the market for operating
systems also is not a cognizable antitrust injury. The court
understands Mr. Wallace’s argument that the GPL may be preventing
him from marketing his own operating system, and, for the purposes
of the instant motion, accepts that allegation as true. However,

[However, he simply ignores Wallace's allegation of predatory 
pricing which is essential element to establish antitrust injury.
He should have accepted that allegation as true for the purposes
of the instant motion as a matter of law.]

while this may be significant enough from Mr. Wallace’s perspective,
a plaintiff must prove not only an injury to him or herself, but
to the market as well, Martin v. Am. Kennel Club, Inc., 697 F.

[Predatory pricing . . . is a practice that harms both competitors 
and competition. (Cargill)]

Supp. 997, 1003 (N.D. Ill. 1988), which Mr. Wallace has failed to
do. As the court stated in its November 28, 2005 Entry, reduced
opportunity as a competitor does not necessarily equate to an
antitrust injury as recognized by the courts. Brunswick, 429 U.S.

[Losses a competitor suffers as a result of predatory pricing is a 
form of antitrust injury because `predatory pricing has the 
requisite anticompetitive effect' against competitors. (Amaral)]

at 488. Indeed, injury in fact is “a different beast” than antitrust

So he admits that there's injury and just fails to recognize that 
it flows from the alleged predatory pricing (the allegation which 
he simply ignores in his analysis).

Predatory pricing has the requisite anticompetitive effect (ARCO).


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