Competition Law for Startups                                                     May 2013

As I deal with law firms, technology companies and their investors, I am often asked what role an antitrust lawyer can usefully play for startups having a limited budget and no in-house legal function.  As founder of Compton Antitrust Law Office (“CALO”), here are my responses to the questions most often posed.

Question:  Isn’t antitrust really just a concern for large, dominant companies?

            CALO:   No, unfortunately.  Most startups have compelling need for competent antitrust counsel in a wide range of scenarios:

+ Dealing with dominant competitors threatening foreclosure from your markets;

+ Establishing coherent distribution strategies to minimize channel conflict

+ Exploiting your IP without running afoul of antitrust investigations or lawsuits

+ Getting access to IP held by others—especially competitors with blocking patents

+ Collaboration via licensing or joint ventures within the bounds of antirust law

+ Entering global markets with a clear understanding of their competition regimes

+ Responding to government cartel, merger or monopoly investigations as a third party

+ Considering strategic mergers or acquisitions involving competitors

+ Responding to threats of antitrust litigation

 

Question:  Our investors have referred us to a lawyer experienced in the problems of startups.  Why should we “double down” on specialized counseling in antitrust? 

CALO:  Antitrust encompasses a huge range of issues, cases and policies that only a few hundred lawyers in this country have made their full-time career.   Even they have difficulty keeping up with developments in such diverse areas as standard-setting, patent litigation settlements, exclusive licensing, price discrimination, channel management and refusals to deal. The antitrust world is three-dimensional: competition regimes worldwide impose their own laws and policies on U.S. global enterprises.  The risks are too great not to bring the experience of outside antitrust counsel to bear when issues arise.  The challenge is to receive true value for that part of your limited legal budget.

Question:  As a pre-public company, we work now with a large law firm that has antitrust lawyers and offers one-stop shopping.  Why go to CALO?

            CALO:  Having founded and led the antitrust practice at Wilson Sonsini Goodrich & Rosati for many years, I appreciate both the value and the downsides of major, multi-practice firms:  cost; inefficiency on smaller matters; and uncertainty about who may be available and who is actually doing the work. By contrast, CALO offers:

 

+My exclusive focus on antitrust and a single point of contact for you.

 

+My experience, judgment and reputation, unsurpassed in technology markets.

+Sophisticated legal services offered far less expensively than when I was a partner in a large law firm; also, the flexibility to meet your needs on billing models and rates.

 

Question:  Are we taking on undue risk by retaining a sole practitioner for antitrust matters? 

CALO:  My antitrust experience and reputation—nationally and internationally—have few peers in technology markets.  I have handled over 900 merger antitrust investigations, none of which was ever blocked or abandoned for antitrust reasons by any U.S. or foreign competition agency.  Having advised hundreds of technology clients, from startups like Tesla Motors, VM Ware, Bloom Energy and Google to companies like HP, Apple, Varian and Sun, I understand the markets, technologies and the special risks and needs of startups. Experience matters.

Question:  Do you handle antitrust litigation?

CALO:  Not directly in most situations—though I have been a litigator from the beginning of my career, and serve today as an arbitrator with AAA and a mediator for the federal court. What I can do is: offer guidance on potential claims when you are considering bringing or threatened by a lawsuit; review existing litigation to offer a second opinion about likely outcomes, litigation strategy or settlement; and supervise outside litigation counsel.

Question:  Can you handle our acquisitions, or our ‘exit’ merger with a competitor?

CALO:  Yes.  I have done or overseen hundreds of HSR filings and the resulting antitrust reviews.  Perhaps more important, however, is assessing the antitrust risk beforehand, supervising any international filings, responding to competition agency demands and successfully bringing the deal to a successful close without an antirust challenge.

Question:  For mergers involving competitors, when should we retain you, and to do what?

 CALO:  You should bring me in as soon as a merger with a competitor is a “gleam in the eye” of the Board or management.  Within 7-10 days I can review any antitrust risks in the deal and propose a strategy for going forward, including possible remedies to a merger likely to be challenged.  After nearly 1000 successful merger investigations, I have a unique perspective and judgment about the likely outcome of merger antitrust risks and investigations.

Question:  For what other counseling services would we be well advised to retain CALO?

 CALO:  Two areas:

1). Marketing, pricing, distribution and IP licensing issues.  After three decades I have seen (or helped create) just about every “go to market” approach imaginable, so can offer suggestions to minimize risk consistent with the business objectives.

2).  Abuse of dominance issues. These are another specialty of mine, having defended IBM and Google, been adverse to Microsoft and AT&T and negotiated conduct disputes on behalf of innumerable startups faced with abusive or monopolistic behavior.  Typical issues include denial of access to networks; refusals to license; predatory innovation;  bundling or loyalty discounts; and exclusionary or discriminatory pricing

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