Regulatory Capture Crosses the Atlantic

This blog has long noted that large Big Tech implementers (e.g., Apple and Google) are engaged in a long term play to incrementally drive down (to zero) their costs and knee-cap their potential competitors before they are a threat. They use astroturfing, (e.g., the ACT | App Association and others I list here); institutional capture (e.g., the IEEE example); spending wads of cash in lobbying governments and academics; capturing regulators; getting their counsel to publish false narratives about SEP royalties; among other tactics.  Well, it seems that in Europe, where sanity on SEP licensing seemed to have started to prevail at least, the implementers are have much to rejoice with the new proposed regulations from DG Grow.  (Florian Mueller did an heroic job of identifying many of the flaws across many, many blog posts, and continues to do so along with countless others.)  It should come as no surprise then, that Big Tech’s US playbook of changing the rules in it favor and appointing the regulators is being attempted in Europe.

The most recent evidence of this Big Tech play is the rumored upcoming appointment of Fiona Scott Morton as DG Competition’s chief antitrust economist.  Unless Ms. Morton is somehow an EU citizen, it is unclear how the nationality requirement was waived.  The why makes a lot of sense, however.  A good place to start is Ms. Scott Morton’s clients, as she herself reveals them (p46):

Apple Inc., Amazon.com Inc., Arista Networks Inc., ASUSTek Computer Inc., Broadcom Inc., C.R. Bard Company, Charles Rivers Associates, Cigna Corp., Honda Motor Co. Ltd., Hopewell Fund, HTC Corp., the John S. and James L. Knight Foundation, Microsoft Corp., Omidyar Network Sanofi SA, Tesla Inc., and two corporate antitrust clients of the author, one in the music industry and one in financial services who remains confidential.

Charles River Associates, as it pertains to SEPs, has ACT, Apple’s SEP astroturfing organization as a key client.  For years, Ms. Scott Morton has been vocally promoting Apple, Microsoft and Amazon’s interests in issues related to standards essential patents (these technology giants want to free ride on the cellular technology that drives their products). That makes sense given that she serves as an expert witness for them repeatedly.

Some examples of her pro-implementer positions include:

• At a Tolouse School of Economics conference on Standard Essential Patents, Prof. Fiona Scott Morton presented herself as “until recently the chief economist of the DOJ Antitrust division” (see in her submitted paper to the conference). In a taped presentation there, available until recently at https://www.youtube.com/watch?v=Q5uqyzBpB_c, Ms. Scott-Morton explains that she had just stepped down after spending a year and half as the chief economist at U.S. Department of Justice Antitrust Division, and goes on to explain the her/the identical DOJ Antitrust Division view is that FRAND means “very low royalties” (see at minute 2:06, and again at minute 3:07). She also suggests a figure of a 0.02% royalty rate (minute 3:18).” The YouTube link has now been designated “private” – does Fiona have something to hide?
• On 5 December 2012, then-DOJ Deputy Assistant Attorney General (DAAG) for Economic Analysis Fiona Scott Morton delivers the speech ”The Role of Standards in the Current Patent Wars” (Presented at Charles River Associates Annual Brussels Conference: Economic Developments in European Competition Policy, December 5, 2012) (p7 emphasis added) explaining:

One of the actions we have taken is to advocate for changes at the SSO level to address the inability of the current F/RAND commitment to protect licensees from holdup. Specifically, we have encouraged SSOs to:….Place some limitations on the right of the patent holder who has made a F/RAND licensing commitment who seeks to exclude a willing and able licensee from the market through an injunction”; “Standards bodies might want to explore setting guidelines for what constitutes a F/RAND rate

•  On 7 December 2012 Then-DOJ Deputy Assistant Attorney General (DAAG) for Economic Analysis Fiona Scott Morton delivered the speech “Antitrust Enforcement in High-Technology Industries: Protecting Innovation and Competition” (Remarks as Prepared for the 2012 NYSBA Annual Antitrust Forum Antitrust in High-Tech Markets – Intervention or Restraint, December 7, 2012), (p18 emphasis added), stating:

In addition to using our enforcement tools to protect competition, the Antitrust Division engages in competition advocacy efforts. Recently, we have focused our attention on issues involving standard setting… One concern we have is that a patent holder may demand licensing terms that are not consistent with this F/RAND promise…. Thus, we have been actively engaged with both firms and standard setting organizations (SSOs) to encourage behavior that benefits competition.

So while some may mistakenly see Ms. Scott Morton as a vocal critic of Big Tech and laud her appointment as Chief Economist at DG Comp, she has been in Big Tech’s pocket for quite some time and her appointment is not good news for those who value SEP and technical standardization, as well as for progressive civic society groups who understand who her clients are.