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We use the decision of Daimler AG. v. Depo Auto Parts Industrial Co. by the Intellectual Property Court of Taiwan in 2019 to re-examine the theories of competitive harm for refusing to license design patents crucial to post-sale repair and maintenance services. Daimler filed the suit against Depo alleging that Depo had infringed on Daimler’s design patents for the headlights used in its Benz E-class model. Depo counterclaimed that Daimler, by refusing to license its patents, had foreclosed entirely the business opportunity for Depo to sell headlights to Benz car owners due to the “must-match” requirement of headlight to automobile. The aftermarket competition for the provision of repair and maintenance service for Daimler’s automobile would be impeded. Daimler rebuffed this antitrust allegation by asserting that competition at the aftermarket were interrelated to Daimler’s market position at the primary market, i.e. the market for automobile sale. Therefore, its overall competitive impacts should be evaluated by treating both markets as an integrated system. Alternatively, Depo questioned the “system competition” hypothesis by asserting that insufficient information about the need and frequency of repair or maintenance would constrain the buyers from making sound purchase decisions. Buyers are to be locked into a disfavored business relationship with Daimler’s dealers and competing automobile suppliers' entry are thereby deterred. In this paper, we first review the system v. separate market debates and the antitrust analytical frameworks by different jurisdictions. We then offer our critical analysis of and policy suggestions to the two major underlying questions in those debates: (1) Regarding the concern of insufficient information at the primary market, competition agencies should distinguish the reality from the relevance of imperfect information in the sale of durable goods. It is the relevance issue that is vital to antitrust analysis; (2) Market-oriented solutions such as extensive and free product warranties serve to address the problem of lock-in and switching costs from uninformed purchases. Additionally, the depreciation cost associated with durable goods may substantially attenuate the magnitude of switching costs. The hypothesis that lock-in and switching costs could amount to an entry barrier for competing durable-goods suppliers may be overstated.
Presenter(s)
Andy Chih Min Chen, Chung Yuan Christian University
Re-Examining the Theories of Competitive Harm for Refusal of Patent Licensing in Durable-Goods Market: A Case Illustration
Category
Volunteer Session Abstract Submission
Description
Session: [270] ENTRY, INNOVATION, AND MARKET COMPETITION
Date: 7/5/2023
Time: 2:30 PM to 4:15 PM
Date: 7/5/2023
Time: 2:30 PM to 4:15 PM