Rigged Results? Antitrust Lessons from Keyword Auctions

Abstract

Bid rigging is quintessential criminal antitrust conduct. Yet search engine optimization experts publicly advise firms to agree with competitors not to bid on each other’s trademarks in search engine keyword auctions, and evidence indicates that companies enter such bid-suppression agreements. This Article examines the parameters of keyword auction bid suppression and why it persists despite the antitrust risks. Auction participants may assume that bid suppression (or other anticompetitive conduct) is lawful if it involves a putative intellectual property right, in this case a trademark or brand-related term. Firms and their advisers might even believe that such agreements are procompetitive because they conserve party and judicial resources and potentially diminish consumer confusion. This reasoning assumes that purchasing a competitor’s trademark for use as a keyword constitutes infringement. However, it appears that no court has found trademark liability solely based on auctioning, bidding on, or purchasing a trademarked keyword. Parties have litigated this issue and the law is in flux. This legal uncertainty puts firms contemplating such bid-suppression agreements and courts evaluating them in a difficult position, one that requires navigating the borders between antitrust law and IP rights. Indeed, these agreements raise the broader question of how to analyze potentially unlawful IP settlements when it is unclear if the rights involved are valid and infringed. This Article proposes a framework for analyzing search engine keyword bid-suppression agreements and other forms of settlements involving uncertain IP rights. Drawing from settlement theory, this framework takes into account the value of decisional law in promoting competition and challenges the assumption — one many courts rely upon — that settlement is necessarily procompetitive. This framework is administrable and provides increased clarity to marketplace actors. It also balances the policy preferences inherent in the IP and antitrust laws.

Keywords: Antitrust, Trademark, Intellectual Property, Internet, Search Engines, Auctions, Bid-Rigging, Settlement