Case: 23-60167 Document: 127 Page: 1 Date Filed: 06/12/2023
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`No. 23-60167
`
`IN THE
`United States Court of Appeals
`for the Fifth Circuit
`——————————
`ILLUMINA, INC. AND GRAIL, INC.,
`Petitioners,
`
`v.
`FEDERAL TRADE COMMISSION,
`Respondent.
`——————————
`Petition for Review of
` An Order of the Federal Trade Commission
`——————————
`BRIEF OF AMICI CURIAE
`ANTITRUST, PATENT, AND LAW-AND-ECONOMICS
`SCHOLARS AND JURISTS IN SUPPORT OF PETITIONERS
`——————————
`Stephen B. Kinnaird
`Michael F. Murray
`PAUL HASTINGS LLP
`2050 M Street, NW
`Washington, D.C. 20036
`
`Counsel for Amici Curiae
`
`June 12, 2023
`
`
`
`

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`Case: 23-60167 Document: 127 Page: 2 Date Filed: 06/12/2023
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`SUPPLEMENTAL CERTIFICATE OF INTERESTED PERSONS
`The undersigned counsel of record certifies that the following listed persons
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`and entities as described in the fourth sentence of Rule 28.2.1 have an interest in the
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`outcome of this case in addition to those listed by the petitioners. These
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`representations are made in order that the judges of this court may evaluate possible
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`disqualification or recusal.
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`Amici Curiae:
`
`Counsel for Amici Curiae:
`
`Stephen Kinnaird
`Michael Murray
`Paul Hastings LLP
`
`Kristina M. L. Acri
`Jonathan M. Barnett
`Donald J. Boudreaux
`Ronald A. Cass
`Jeffrey Church
`Richard A. Epstein
`Barry Harris
`Bowman Heiden
`The Honorable Paul Michel
`Adam Mossoff
`Kristen Osenga
`Alan O. Sykes
`
`
`
`
`
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`
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`

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`Case: 23-60167 Document: 127 Page: 3 Date Filed: 06/12/2023
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`TABLE OF CONTENTS
`TABLE OF CONTENTS ........................................................................................... i
`TABLE OF AUTHORITIES .................................................................................... ii
`INTEREST OF AMICI CURIAE ............................................................................... 1
`INTRODUCTION AND SUMMARY OF ARGUMENT ........................................ 2
`ARGUMENT ............................................................................................................. 3
`I. The FTC’s Structure and Procedures Deviate from Sound Government, as
`Evidenced by This Case. ................................................................................... 3
`A. The FTC Combined Investigative, Prosecutorial, and Adjudicative Powers to
`Significant Effect in This Case. ........................................................................ 4
`B. The FTC Changed the Rules in this Matter Mid-Stream. ................................. 6
`C. The FTC Diverged from District Court Practice in Relying on a Long-
`Abandoned Approach Disfavoring Vertical Mergers That It Prefers as a
`Matter of Policy. ............................................................................................... 8
`II. The Commission Misapplied the Antitrust Laws. .......................................... 14
`A. The Commission Erred in Its Discussion of a So-called R&D Market. ......... 14
`B. The Commission Erred in Its Treatment of the “Open Offer.” ...................... 15
`C. The Commission Erred in Its Discussion of Pro-Competitive Phenomena
`Such as Patents and Efficiencies. .................................................................... 21
`CONCLUSION ........................................................................................................ 22
`APPENDIX .............................................................................................................. 23
`CERTIFICATE OF COMPLIANCE ....................................................................... 25
`CERTIFICATE OF SERVICE ................................................................................ 26
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`i
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`
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`TABLE OF AUTHORITIES
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` Page(s)
`
`Cases
`Axon Enter., Inc. v. FTC,
`143 S. Ct. 890 (2023) ............................................................................................ 6
`Bouie v. City of Columbia,
`378 U.S. 347 (1964) .............................................................................................. 6
`FTC v. Arch Coal, Inc.,
`329 F. Supp. 2d 109 (D.D.C. 2004) .................................................................... 17
`Illinois Tool Works Inc. v. Independent Ink, Inc.,
`547 U.S. 28 (2006) .............................................................................................. 21
`In re Murchison,
`349 U.S. 133 (1955) ...................................................................................... 2, 4, 5
`Rogers v. Tennessee,
`532 U.S. 451 (2001) .............................................................................................. 6
`United States v. Aetna, Inc.,
`240 F. Supp. 3d 1 (D.D.C. 2017) ........................................................................ 19
`United States v. AT&T Inc.,
`310 F. Supp. 3d 161 (D.D.C. 2018) ........................................................ 13, 17, 21
`United States v. AT&T Inc.,
`
`916 F.3d 1029 (D.C. Cir. 2019) .......................................................................... 18
`
`United States v. Gen. Dynamics Corp.,
`415 U.S. 486 (1974) ............................................................................................ 18
`United States v. UnitedHealth Grp. Inc.,
`No. 1:22-CV-0481 (CJN), 2022 WL 4365867 (D.D.C. Sept. 21,
`2022) ................................................................................................................... 18
`Withrow v. Larkin,
`421 U.S. 35 (1975) ................................................................................................ 6
`
`ii
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`Williams v. Pennsylvania,
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`579 U.S. 1 (2016) .................................................................................................. 5
`
`Other Authorities
`ABA Section of Antitrust Law, Mergers and Acquisitions (3d ed.
`2008) ............................................................................................................... 8, 11
`Earl W. Kintner et al, Federal Antitrust Law (2020) ..................................... 9, 11, 12
`Julian von Kalinowski et al., Antitrust Laws and Trade Regulation (2d
`ed. 2021) ............................................................................................................ 12
`Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis
`of Antitrust Principles and Their Application (5th ed. 2020) ......................... 9, 11
`Oliver E. Williamson, Economics as an Antitrust Defense: The
`Welfare Tradeoffs, 58 Am. Econ. Rev. 18 (1968) ................................................. 9
`Ralitza A. Grigorova-Minchev & Thomas W. Hazlett, Policy-Induced
`Competition: The Case of Cable TV Set-Top Boxes, 12 MINN. J. L.
`SCI. & TECH. 279 (2011) ....................................................................................... 9
`Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U.
`PA. L. REV. 925 (1979) ................................................................................. 10, 11
`U.S. DEP’T OF JUSTICE AND FED. TRADE COMM’N, HORIZONTAL
`MERGER GUIDELINES (Aug. 19, 2010) ................................................................ 21
`U.S. DEP’T OF JUSTICE AND FED. TRADE COMM’N, VERTICAL MERGER
`GUIDELINES (June 30, 2020) ................................................................................. 7
`
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`iii
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`INTEREST OF AMICI CURIAE
`Amici curiae are 12 law professors, economists, and former government
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`officials with expertise in antitrust, patent law, and law and economics.1 As scholars
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`and former public servants, they have an interest in promoting the coherence and
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`development of legal doctrines consonant with sound economic principles and in
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`ensuring that both consumers and the general public benefit from new inventions
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`and technologies. They have no stake in any party nor in the outcome of this
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`proceeding. Amici write to serve the Court and the public interest by elaborating the
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`legal and economic principles that frame this dispute. The amici and their
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`affiliations are listed in the Appendix.
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`The amici have a substantial interest in this appeal for two reasons. First,
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`amici are concerned by the impact of the Federal Trade Commission’s (“FTC” or
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`“Commission”) structure and processes on the sound administration of antitrust law.
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`Second, amici are concerned about multiple errors of antitrust law that appear in the
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`FTC’s opinion in this case.
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`
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`
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`1 No counsel for any party authored this brief in whole or in part and no entity
`or person, aside from amici curiae or their counsel, made any monetary contribution
`intended to fund the preparation or submission of this brief. All parties have
`consented to the filing of this brief.
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`1
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`INTRODUCTION AND SUMMARY OF ARGUMENT
`This case epitomizes numerous problems with the FTC and its current
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`approach to antitrust law. The FTC’s structure and procedures deviate from sound
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`government. In particular, the FTC serves as investigator, prosecutor, and
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`adjudicator, in violation of fundamental norms of due process. It is axiomatic that
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`“no man can be a judge in his own case and no man is permitted to try cases where
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`he has an interest in the outcome.” In re Murchison, 349 U.S. 133, 136 (1955). Yet
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`here the FTC approved the prosecution of the merger challenge and then overruled
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`the judge who decided that it failed under currently applicable law. These structural
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`and procedural deformities also enabled the FTC to change the rules of the game to
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`its advantage in the middle of this merger challenge: the merging parties agreed
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`upon their transaction when the agency adhered to one set of principles for assessing
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`vertical mergers, only to discover that these principles were abandoned by their
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`prosecutor in the middle of a challenge to their merger. These structures and
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`procedures regrettably empowered the FTC to litigate and adjudicate this merger
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`challenge under its preferred, yet untested, policy approach to vertical mergers, as
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`opposed to well-established principles and precedent.
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`
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`The result of these problematic structures and procedures are found in
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`numerous substantive antitrust errors in the Commission’s final decision. First, the
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`Commission posited a “research and development” “market” that confounds basic
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`2
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`principles of antitrust law. That supposed “market” has not yet produced any
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`product, which necessarily renders any indication of anticompetitive harm
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`speculative. Second, the Commission relegated the parties’ binding contractual
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`commitment to an afterthought, instead of treating it as the dominant market reality
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`that it is. Not only does that reflect a deep misunderstanding of antitrust law, it
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`discourages merging parties from trying to mitigate in advance of litigation any
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`potential harms from a merger. Finally, the Commission appeared to disregard
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`longstanding and basic principles of intellectual property and antitrust law, including
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`the blackletter law doctrine set by the Supreme Court that a patent does not confer
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`monopoly power, and that a patent can be part of a commercial plan that allows any
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`given merger to produce legally cognizable efficiencies.
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`ARGUMENT
`I. The FTC’s Structure and Procedures Deviate from Sound Government,
`as Evidenced by This Case.
`The FTC’s structures and procedures as implemented in this case deviate from
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`sound government practices. First, with respect to structure, the FTC now operates
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`by principles very different from those in the U.S. Department of Justice in
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`processing merger reviews and challenges. The FTC combines investigative,
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`prosecutorial, and adjudicative powers for a single case in the same body. This
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`combination raises fundamental due process concerns. Second, in this case the FTC
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`changed the governing standards mid-stream. It would not be acceptable for an
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`3
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`Article III court to change its substantive rules in the middle of a case. Finally, in
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`this case, the FTC simply rejected established precedent to further its new untested
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`policy approach. The sounder view of government is to require law enforcement to
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`convince independent adjudicators of new approaches.2
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`A. The FTC Combined Investigative, Prosecutorial, and
`Adjudicative Powers to Significant Effect in This Case.
`Due process requires “a fair trial in a fair tribunal.” In re Murchison, 349 U.S.
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`at 136. A fair trial in a fair tribunal requires a lack of prejudgment by the adjudicator
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`of the outcome and a lack of interest in the outcome. Those requirements are often
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`encapsulated by the pithy maxims that “no man can be a judge in his own case and
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`no man is permitted to try cases where he has an interest in the outcome.” Id.
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`
`2 The unusual procedures of the FTC were experienced by amici in this case. After
`filing an amici curiae brief before the ALJ, FTC staff, in opposing the brief’s filing,
`requested that amici make disclosures above and beyond those required in federal
`courts, including, but not limited to, “all non-pecuniary ties” between the professors
`and their universities and respondents. Apparently, the FTC’s staff concluded that
`it is improper for anyone at one of amici’s universities to have undisclosed social
`“ties” with anyone at a charged company. See Complaint Counsel’s Opposition to
`Non-Party Antitrust, Patent, and Law-and-Economics Scholars and Jurists Motion
`for Leave to File Brief as Amici Curiae Supporting Respondents, In the Matter of
`Illumina, Inc. and Grail, Inc., No. 9401, at 6 (Oct. 29, 2021). At least, they make
`this demand only when amici oppose the staff. Notably, FTC staff did not make a
`similar request with respect to the nonprofit organization and amici that filed briefs
`in support of the staff’s view. After receiving this opposition, the ALJ initially
`rejected amici’s brief, Order Denying Motion for Leave to File Amicus Curiae Brief,
`In the Matter of Illumina, Inc. and Grail, Inc., No. 9401 (Nov. 5, 2021), although it
`was later accepted, Order Granting Leave to File Brief Amici Curiae, In the Matter
`of Illumina, Inc. and Grail, Inc., No. 9401 (Nov. 29, 2022).
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`4
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`The combination of investigatory, prosecutorial, and adjudicatory powers in
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`a single body threatens this basic principle of due process. In In re Murchison, for
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`example, the Supreme Court held that the judge who sat as the investigative and
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`prosecutorial grand jury could not also sit as the judge in the merits hearing. As the
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`Court explained, the grand jury is “part of the accusatory process” and “[h]aving
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`been a part of that process a judge cannot be, in the very nature of things, wholly
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`disinterested in the conviction or acquittal of those accused.” Id. at 137.
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`In Williams v. Pennsylvania, similarly, the Supreme Court held that an
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`attorney who served as a prosecutor on a matter and made a key prosecutorial
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`decision could not then serve as a judge in the matter. 579 U.S. 1 (2016). The Court
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`explained that “an unconstitutional potential for bias exists when the same person
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`serves as both accuser and adjudicator in a case.” Id. at 8. For the prosecutor turned
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`judge, there is the “risk that the judge ‘would be so psychologically wedded’ to his
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`or her previous position as a prosecutor that the judge ‘would consciously or
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`unconsciously avoid the appearance of having erred or changed position.’” Id. at 9-
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`10 (quoting Withrow v. Larkin, 421 U.S. 35, 57 (1975)).
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`In this case, the FTC’s combination of investigative, prosecutorial, and
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`adjudicative functions is on full display. The Commission approved the complaint,
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`directed its staff to prosecute the case before the ALJ that it hired, and then overruled
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`the ALJ after his exhaustive opinion against the Commission’s position. There is no
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`doubt that the FTC is, as Justice Gorsuch put it, serving as “investigator, prosecutor,
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`and judge.” Axon Enter., Inc. v. FTC, 143 S. Ct. 890, 917 (2023) (Gorsuch, J.,
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`concurring).
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`It is of course true that the combination of functions does not always raise due
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`process concerns. See Withrow, 421 U.S. at 51-52. But if a decisions has a legal
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`consequence for private parties and is not subject to plenary judicial review, the
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`combination of functions is likely to violate due process. If there is any doubt about
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`the threat to due process created by this combination of functions in a single agency
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`here, the FTC’s win rate dispels it. The estimate is that the FTC has prevailed in its
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`in-house proceedings “only” ninety percent of the time. Axon, 143 S. Ct. at 917-19
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`(Gorsuch, J., concurring) (comparing representations about FTC win rate).
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`B. The FTC Changed the Rules in this Matter Mid-Stream.
`“[C]ore due process concepts” include “notice, foreseeability, and, in
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`particular, the right to fair warning.” Rogers v. Tennessee, 532 U.S. 451, 459 (2001).
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`These concepts prevent, for example, courts from changing their interpretation of a
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`statute and applying the new version to conduct that already occurred. Id.; see also
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`Bouie v. City of Columbia, 378 U.S. 347, 354 (1964).
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`The concerns animating this doctrine against retroactive decisionmaking are
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`present in this matter. Illumina, Inc. (“Illumina”) and GRAIL, Inc. (“GRAIL”)
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`agreed to their transaction in September, 2020. See Complaint, In the Matter of
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`6
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`Illumina, Inc. and GRAIL, Inc., No. 9401, ¶23 (Mar. 30, 2021). At that time, the
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`FTC applied the 2020 Vertical Merger Guidelines. U.S. DEP’T OF JUSTICE AND FED.
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`TRADE COMM’N, VERTICAL MERGER GUIDELINES 12 (June 30, 2020).
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`The parties could, and did, assess their transaction against those guidelines.
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`Those guidelines recognized the benefits of vertical mergers and set forth a
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`framework by which the agency would assess such mergers. The Commission
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`challenged the transaction when those guidelines were still in place. Indeed, as one
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`commissioner noted, the staff applied those guidelines in recommending a challenge
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`to the merger. See Dissenting Statement of Commissioners Noah Joshua Phillips
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`and Christine S. Wilson Regarding the Commission’s Rescission of the 2020
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`FTC/DOJ Vertical Merger Guidelines and the Commentary on Vertical Merger
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`Enforcement, at n.8 (Sept. 15, 2021).
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`Subsequently, in the middle of a challenge to this transaction, the FTC
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`withdrew those Guidelines in a split 3-2 decision. See Statement of Chair Lina M.
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`Khan, Commissioner Rohit Chopra, and Commissioner Rebecca Kelly Slaughter on
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`the Withdrawal of the Vertical Merger Guidelines, Commission File No. P810034
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`(Sept. 15, 2021). That withdrawal favored a ruling against the transaction. In Article
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`III courts, the withdrawal of the governing substantive standard would not pass
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`muster during the pendency of a proceeding. Here, Illumina and GRAIL were forced
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`to continue defending their merger in an ongoing enforcement action against them
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`as if nothing happened.
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`C. The FTC Diverged from District Court Practice in Relying on a
`Long-Abandoned Approach Disfavoring Vertical Mergers That It
`Prefers as a Matter of Policy.
`The withdrawal of the Vertical Merger Guidelines mid-stream in this matter
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`goes hand-in-hand with another troubling development: the FTC’s decision to
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`resuscitate a long-abandoned approach to vertical mergers that it favors as a policy
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`matter even though it has been decisively rejected by courts. Federal courts would
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`not (indeed, have not) followed this approach, further confirming that the FTC’s
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`structure and procedures call into question the fundamental fairness of its actions.
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`To understand the FTC’s radical divergence from federal court practice, it is
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`first important to recognize that vertical mergers differ from horizontal mergers.
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`The key difference between vertical and horizontal mergers is that the latter
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`eliminate competition among substitute firms, whereas vertical mergers bring
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`complementary firms together, thereby reducing the coordination problems at
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`different stages of production in bringing new products to market. See ABA Section
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`of Antitrust Law, Mergers and Acquisitions 439 (3d ed. 2008).
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`Horizontal mergers, that is, mergers of competitors, pose an inherent risk of
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`reducing competition. Higher market concentrations, as measured by the
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`Herfindahl-Hirschman Index, have the potential to weaken competition through
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`8
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`higher prices or lower quality for consumers. See Phillip E. Areeda & Herbert
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`Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their
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`Application ¶ 901a (5th ed. 2020). Antitrust law, therefore, justifiably scrutinizes
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`most horizontal mergers to see if their efficiency gains outweigh their restrictive
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`effects.
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`By contrast, vertical mergers, that is, mergers among firms at different levels
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`in a supply chain, do not carry these inherent risks: “In contrast to horizontal
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`mergers, which have certain inherent anticompetitive consequences, vertical
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`mergers generally have no inherent anticompetitive characteristics.” 4 Earl W.
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`Kintner et al., Federal Antitrust Law § 35.3 (2020); see also Oliver E. Williamson,
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`Economics as an Antitrust Defense: The Welfare Tradeoffs, 58 Am. Econ. Rev. 18
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`(1968) (advancing the standard model to weigh the efficiency gains versus against
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`the restrictive effects of these mergers).
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`That is the current state of play. But long ago, scholars worried that vertical
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`mergers would harm competition by raising barriers to entry. If a manufacturer were
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`allowed to buy one of its retailers, for example, then competing manufacturers would
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`lose access to that retailer, leading to the (dubious) inference that this change in
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`supply practices must harm competition. See Ralitza A. Grigorova-Minchev &
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`Thomas W. Hazlett, Policy-Induced Competition: The Case of Cable TV Set-Top
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`Boxes, 12 MINN. J. L. SCI. & TECH. 279, 284 (2011) (first describing and then refuting
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`9
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`this historical concern). Commentators and legal authorities also used to express
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`concerns that a manufacturer with a monopoly on a particular good might stop
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`selling that good to competitive retailers.
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`Antitrust scholarship, however, has long since exposed these historical
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`concerns as fundamentally misconceived. Judge Richard Posner long ago explained
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`why these concerns, which animate the Commission’s theory in this case, are
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`unsound:
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`Suppose, for example, that kryptonite is an indispensable input in the
`manufacture of widgets. A owns all the kryptonite in the universe and also
`manufactures widgets. He could, of course, refuse to sell kryptonite to B, a
`prospective entrant into widget production. The cost to A of this refusal is the
`price B would have been willing to pay. Stated differently, by his control of
`kryptonite A can extract any monopoly rents available in the widget industry
`without denying a place in widget manufacture to others [sic] firms. If there
`is a proper antitrust objection, it is to the kryptonite monopoly rather than to
`vertical integration.
`Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. PA. L. REV.
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`925, 936-37 (1979). In other words, some monopoly rent is assured whether or not
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`the monopolist licenses its product to others. Hence, if licensing to others is more
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`efficient, then firms will engage in that practice without any antitrust compulsion.
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`Thus the FTC’s asserted fear of inevitable market foreclosure following a merger is
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`baseless given that the only way the firm can foreclose downstream competitors is
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`to undermine its own business success.
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`Today, Judge Posner’s conclusion—that a company cannot double its
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`monopoly profits just by vertically merging with another firm—is widely accepted
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`in both economic theory and antitrust law. The leading antitrust treatise notes that,
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`[a]s a general proposition, the profit-maximizing price is determined by the
`willingness to pay of end-use consumers, and a firm monopolizing a single
`stage of the production process can obtain all the monopoly profits that are
`available for that product. Adding another stage cannot simply “leverage”
`additional profits or lead to higher prices.
`Areeda & Hovenkamp, supra, ¶ 1003a (footnote omitted).
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`Indeed, modern commentators recognize that vertical mergers usually benefit
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`consumers by achieving efficiencies. Areeda and Hovenkamp take the view “that
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`most vertical mergers are procompetitive,” since “most instances of vertical
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`integration, even by a monopolist, are competitive.” Id. at subchapter 10A-1
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`Introduction. Efficiencies outweigh any potential restrictive effects because vertical
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`mergers are generally motivated by legitimate business considerations—such as
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`reducing costs—that increase, rather than stifle, competition. See 4 Kintner et al.,
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`supra, § 35.6 (“The same factors that make a vertical merger advantageous from a
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`business viewpoint also may make the merger procompetitive.”); ABA Section of
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`Antitrust Law, supra, at 440 (noting economists’ view that, because vertical mergers
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`involve complements rather than substitutes, such mergers are “more likely to be
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`motivated by a desire to reduce, rather than increase, the prices of the parties’
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`products”).
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`11
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`These efficiencies include the reduction of various transaction costs, such as
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`various breakdown and hold-up problems that can plague distribution chains when
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`separate firms engage in sequential activities, each of which is necessary to produce
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`the finished product. Vertical mergers can also facilitate intra-firm coordination that
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`improves products or service. See 2 Julian von Kalinowski et al., Antitrust Laws
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`and Trade Regulation §§ 30.03-.04 (2d ed. 2021). An acquired firm may also be
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`made a stronger competitor through infusions of capital, new management, or
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`reduced overhead costs, all of which can lead to more competitive pricing or
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`expanded production. See 4 Kintner et al., supra, § 35.6. The downstream firm can
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`also reduce uncertainty in the demand for the upstream supplier’s products, which
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`can further reduce costs and consumer prices. See 2 Kalinowski et al., supra, § 30.03.
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`In this case, the debate between the majority and the concurrence in the
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`Commission’s final decision demonstrates that the FTC revived the debunked
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`historical approach to vertical mergers.3 Their debate focused on the now-abrogated
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`2020 Vertical Merger Guidelines, which generally recognized the foregoing
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`developments in law and economics. Specifically, the Guidelines assessed vertical
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`mergers through ability and incentive analysis, not through the discredited approach
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`of early twentieth-century antitrust law that was informed by mistaken economic
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`3 The concurrence, although more correct in its approach, errs in its discussion of
`foreclosure and the open offer for the reasons stated below.
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`12
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`Case: 23-60167 Document: 127 Page: 18 Date Filed: 06/12/2023
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`assumptions. Under ability and incentive analysis, the key question is whether a
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`transaction would increase the ability or incentive of the combined firm to foreclose
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`rivals from inputs, or perhaps distribution outlets.
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`This modern approach contrasts with what the Commission calls a “Brown
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`Shoe approach” that focuses on more simplistic measures, such as market share. But,
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`as discussed above, courts, commentators, and government regulators have relegated
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`the so-called “Brown Shoe approach” to the dustbin. As Commissioner Wilson
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`summarized, “all recent litigated vertical merger cases employ only the ability and
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`incentive analysis” and the last opinion to employ a “Brown Shoe approach” was in
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`1979. Concurrence of Commissioner Christine S. Wilson, In the Matter of Illumina,
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`Inc. and GRAIL, Inc., No. 9401, at 2 (Apr. 3, 2023) (hereinafter Conc.). That is
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`because the “Brown Shoe approach” has been repudiated by “the economic writing
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`since the 1980s” as overly simplistic. Herbert J. Hovenkamp, Competitive Harm
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`from Vertical Mergers 5, U. of Penn. Inst. For Law & Econ. Research Paper No. 20-
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`51 (2020). For vertical mergers, as the Department of Justice stated in AT&T, “there
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`is no short-cut way to establish anticompetitive effects, as there is with horizontal
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`mergers.” United States v. AT&T Inc., 310 F. Supp. 3d 161, 192 (D.D.C. 2018),
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`aff’d 916 F.3d 1029 (D.C. Cir. 2019).
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`In light of these developments in law and scholarship, federal courts would be
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`remiss to apply the type of legally anachronistic and economically discredited
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`Case: 23-60167 Document: 127 Page: 19 Date Filed: 06/12/2023
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`analysis employed by the Commission in this case. This radical divergence from
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`existing antitrust doctrine on vertical mergers is symptomatic of the fundamental
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`unfairness that results from an agency’s departure from the separation of powers
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`principles and due process requirements as evidenced by the FTC’s structures and
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`procedures.
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`II. The Commission Misapplied the Antitrust Laws.
`The preceding section explained how the Commission’s structure and
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`processes give rise to significant due process concerns and enabled the Commission
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`to enforce its dubious policy approach instead of the law. This section explains that
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`the fruit of these flawed structures and processes consists of a series of significant,
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`specific legal errors of antitrust law.
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`A. The Commission Erred in Its Discussion of a So-called R&D
`Market.
`The FTC discussed at length supposed competition in a “market” for research
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`and development of MCED tests. See Opinion of the Commission, In the Matter of
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`Illumina, Inc. and GRAIL, Inc., No. 9401, at 30-34 (Apr. 3, 2023) (hereinafter FTC
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`Op.). This analysis is not consistent with antitrust law.
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` Antitrust law defines markets through the “practical indicia” test of Brown
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`Shoe or the hypothetical monopolist test typical of horizontal merger analysis. See
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`Case: 23-60167 Document: 127 Page: 20 Date Filed: 06/12/2023
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`Op. Br. 34 (collecting citations).4 In either case, courts focus on an existing product
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`or service that is sold or purchased by buyers or sellers.
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`The problem for the FTC’s focus on research and development, in light of this
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`precedent, is twofold. First, research and development is by definition focused on
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`the development of future products or services. It is entirely speculative for the FTC
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`to rely on supposed competition in a market that has not yet produced and may never
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`produce an actual product or service.
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`Second, the buyers and sellers of research and development that would be
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`harmed from an antitrust law violation are at best unclear. To a significant extent,
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`the buyers and sellers of research and development are the investment firms that
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`fund biomedical research. But the FTC has provided no analysis of harm to those
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`firms. Nor has there been any analysis that the merging firms’ rivals are unable to
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`secure funding for research and development. Rather, the supposed harms related
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`to the so-called research and development market purportedly occur in a different
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`product market whose products have not yet been developed.
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`B. The Commission Erred in Its Treatment of the “Open Offer.”
`1. Illumina’s contractual commitments in its Open Offer program defeat the
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`FTC’s claim of m