Driverless Cars Will Have To Navigate Antitrust Curves

By Daniel Vitelli

As noted by Boies Schiller partner Scott Gant in his recent Forbes article, not only is the much-anticipated arrival of driverless cars on the roads raising thorny questions regarding their safety, efficiency and ethical use, but antitrust issues are hitching a ride as well.

While suppliers and consumers work together to navigate the technological and social roadblocks, potential antitrust enforcement is also on the horizon.  As with any disruptive technology the driverless car industry raises complex competition issues and likely scrutiny from antitrust enforcers.

The automotive industry is no stranger to antitrust law.  For example, over the last several years, the U.S. Department of Justice has investigated and prosecuted several individuals and companies for antitrust violations in the auto parts industry.  For example, in January 2015 Sanden Corp., a Japanese auto parts manufacturer, “agreed to plead guilty and to pay a $3.2 million criminal fine for its role in a conspiracy to suppress and eliminate competition for the purchase of compressors used in air conditioning systems.”  Dept. of Justice, Press Release Jan. 27, 2015. State antitrust actions and private litigation soon followed.

The companies that will develop and sell driverless cars should be careful to avoid anticompetitive collaborations.  Some level of coordination is perhaps inevitable.

For example, driverless car companies may participate in standard-setting activities to reap the benefits of interoperability.  Such coordination is not necessarily a bad thing—this author, for one, would prefer driverless cars to recognize other driverless cars on the road as well as possible and to perform accordingly.  In the context of standard-setting body Institute of Electrical and Electronics Engineers, Inc. (IEEE), the Department of Justice recently noted that standards “may facilitate product interoperability, lower costs, foster innovation and efficiency, and increase competition among technologies for inclusion in standards.”  Dept. of Justice, Press Release Feb. 2, 2015.  But on the other hand, standard setting activities present opportunities for incumbents to work together to hinder or altogether block competitors.  The participants, as well as the standard setting bodies themselves, must be very mindful of the antitrust laws.

The antitrust concerns are not merely confined to the cars’ positioning technology or other inputs.  Many predict that driverless cars will shake-up the way liability insurance is provided.  Will the suppliers of driverless cars offer liability insurance?  If so, how much will it cost?  What will it cover?  Gant writes “If … sellers coordinate with one another about their [liability insurance] offerings – or go further, and agree on their offerings – this could seriously injure consumers in the form of higher costs, less coverage, or both.”  Perhaps the legislative branch will mandate a solution.  But absent legislation, the suppliers of driverless cars should make unilateral business decisions with respect to liability insurance offerings.  Liability insurance may be subject to antitrust scrutiny just like any other product.

As with other disruptive technologies, incumbents unprepared or unwilling to offer or adopt the disrupting product may push back to maintain the status quo. Think not only of traditional car manufacturers, but also of the many professionals, such as truck, taxi, and bus drivers, who may have an economic interest in keeping driverless cars off the road. Certain conduct, such as petitioning the Government for tighter regulation of driverless cars (e.g., safety regulations), may be shielded from antitrust scrutiny under the Noerr-Pennington doctrine. Other conduct, however, such as coordinating to pressure companies not to deal with driverless car manufacturers, may not be afforded the same protections.

Finally, companies that sell driverless cars but not traditional cars may also confront distribution hurdles similar to those faced by Tesla. A recent FTC staff blog supported easing state legislation that prohibited direct-to-consumer distribution of cars, stating “States should allow consumers to choose not only the cars they buy, but also how they buy them.”

Driverless cars appear to be the wave of the future.  They present an exciting opportunity to improve the safety, reliability, and efficiency of ground transportation.  When the first driverless cars are unleashed, the world will be watching—but so will the antitrust enforcers.

– Edited by Gary J. Malone