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What do @HalSinger, @geoffmanne, @RichardAEpstein, Keith Hylton, and yours truly have in common? We all believe @FTC blew it in its 1-800 Contacts decision. We joined @WLF to ask the 2nd Cir to vacate FTC’s order. truthonthemarket.com/2019/06/18/the…
In settling trademark disputes, 1-800 and some rivals agreed not to bid on search ads keyed to each other’s trademarks. FTC said this was “inherently suspect” and condemned it under the “quick look” approach. Two problems with that:
First, SCt has required full rule of reason in cases involving more extensive ad restrictions (Cal Dental) and IP settlements threatening greater anticompetitive harm (Actavis). If no QL there, then surely not here. Also, FTC ignored a key procompetitive benefit of restrictions:
1-800 spent big to build online contact lens mkt. Along the way, created a strong brand. Rivals who didn’t spend to build mkt can underprice. In placing ads tied to 1-800’s name, they free-ride. If pioneers who spend to create mkt can lose out to free-riders, less pioneering!
1-800’s trademark settlements were a narrowly tailored effort to prevent inefficient free-riding, while otherwise preserving freedom to advertise. The restrictions were not inherently suspect, and ROR should’ve applied. THE END
