Can Common Business Practices Ever Be Anticompetitive? Redefining Monopolization

• Published date: 01 March 2020
• DOI: http://doi.org/10.1111/ablj.12157
• Date: 01 March 2020
• Author: Konstantinos Stylianou

American Business Law Journal

Volume 57, Issue 1, 169–221, Spring 2020

Can Common Business Practices

Ever Be Anticompetitive? Redefining

Monopolization

Konstantinos Stylianou*

For most of its modern history, antitrust law distinguished between nor-

mal competition and monopolization by looking for merit, legitimate

business justifications, or efficiencies in the challenged business conduct.

These proxies were seen as appropriate because they served antitrust

law’s welfare objectives well. However, the universal adoption of these

proxies has overshadowed significant shortcomings, chief among them

being that firms do not think in terms of legitimate business justifications

or efficiencies, but rather in terms of long-term sustainability and appro-

priation of value. As a result, antitrust law becomes detached from the

very subjects it purports to regulate. Against the backdrop of the recent

resurgence of enforcement activity, particularly involving tech giants, this

article attempts a conceptualization of monopolization that does not

revolve around merit in any form or function. Instead it introduces the

proxy of commonness of business practices to determine their legality.

This helps highlight the importance of considering “how things are

done” in the relevant market, and helps reground antitrust law in busi-

ness realities, which can enhance the heuristic mechanism of dis-

tinguishing between normal and anticompetitive practices. To prove this

point the article develops an error test framework, through which it

compares current tests with the proposed test in terms of their error

*Associate Professor and Deputy Director, Centre for Business Law and Practice, University

of Leeds School of Law. Professor Stylianou holds an S.J.D. from the University of Pennsyl-

vania, an LL.M. from Harvard University, and an LL.M. and LL.B. from Aristotle Univer-

sity. This article has benefited greatly from discussions with numerous people, to which I

am indebted. I wish to particularly acknowledge help by Pinar Akman, Oles Andriychuk,

Sebastian Dengler, Agnieszka Janczuk, Thomaz Pereira,Carlos Ragazzo, Vatsalya Srivastava,

Peter Whelan, and the participants in the Yale ISP Ideas Lunch seminar series, the Tilburg

TILEC Works in Progress workshop series, and the FGV Works in Progress workshop

series.

©2020 The Author

American Business Law Journal ©2020 Academy of Legal Studies in Business

169

footprint and concludes that the integration of the commonness parame-

ter delivers better results. Ultimately, the inquiry undertaken herein is

not only about constructing a conception of normal competition different

from the only standard we currently have, that is, variants of merit, but

also about shifting the conversation from how to fine-tune existing stan-

dards to how to capture a more complete conception of competition.

INTRODUCTION

Antitrust law has always struggled to distinguish between normal and

unilateral anticompetitive conduct, known as monopolization in the

United States and abuse of dominance in the European Union. Done

properly, the task would separate practices that tend to increase eco-

nomic welfare and are labeled normal competition from those that tend

to reduce it and are referred to as anticompetitive, monopolistic, or abu-

sive practices.

1

The task is difficult because the means of illicit conduct

and the means of legitimate competition are myriad, and virtually every

anticompetitive act has a measure of procompetitive benefits. This

exposes the inquiry to heightened subjectivity and potential open-ended

interpretation.

2

There is certainly no shortage of tests to distinguish between normal

and monopolistic conduct. Many of them are unhelpful because they are

circular. To define, for example, monopolization or abuse of dominance

as conduct that “unfairly tends to destroy competition,”

3

“[is] directed at

smothering competition,”

4

“substantially fetter[s] competition,”

5

or as

“recourse to methods different from those which condition normal com-

petition”

6

adds little to the inquiry because these formulations contain

1

LAWRENCE SULLIVAN ET AL., THE LAW OF ANTITRUST:ANINTEGRATED HANDBOOK 10–11 (2016);

GIORGIO MONTI,ECCOMPETITION LAW 22 (2007).

2

Cf. United States v. Microsoft Corp., 253 F.3d 34, 58 (D.C. Cir. 2001).

3

Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993).

4

Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 275 (2d Cir. 1979).

5

Case 6/72, Euroemballage Corp. v. Comm’n, 1973 E.C.R. 215, 245 ¶ 26.

6

Case 85/76, Hoffmann-La Roche & Co. AG v. Comm’n, 1979 E.C.R. 465, 541 ¶ 91.

170 Vol. 57 / American Business Law Journal

terms similar to those they are supposed to prove and are therefore

vacuous.

7

However, the majority of tests are not vacuous, and an interesting—if

overlooked—pattern emerges when one looks at them collectively. Virtu-

ally every other non-vacuous test antitrust courts and enforcers have

devised relies on a showing of merit, legitimate business justifications, or

efficiencies to determine that a challenged practice is normal competition

as opposed to monopolization or abuse of dominance. This kind of sanc-

tioned competition manifests itself through various terms, including

“business acumen,”

8

“valid business reasons,”

9

“superior product,”

10

“traders’ performance,”

11

“merit,”

12

and “procompetitive justification

[and] efficiency,”

13

and is also prevalent within scholarly discourse.

14

In

other words, vacuous tests aside, we have no other understanding of

legitimate competition outside of what can collectively be called competi-

tion on the merits.

There is no doubt that competition on the merits, in any of its above

variants, is a good standard, as it contributes to increased economic effi-

ciency and welfare—both signs of healthy markets.

15

Its universal accep-

tance may even imply that courts, enforcers, and scholars consider it the

best available standard. But we will never know how well competition on

the merits fares against other possible conceptions of legitimate competi-

tion, unless we devise a standard that does not revolve around merit in

any form or function. This article is an exploration in that direction. It

7

Einer Elhauge, Defining Better Monopolization Standards,56STAN.L.REV.

253, 261–68 (2003).

8

United States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966).

9

Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 483 (1992).

10

Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 596 (1985).

11

Case C-322/81, Michelin v. Comm’n, 1983 E.C.R. 3467, 3514 ¶ 70.

12

Case T-228/97, Irish Sugar PLC v. Comm’n, 1999 E.C.R. II-2975, 3021 ¶ 111 (citing Case

C-62/86, AKZO v. Comm’n, 1991 E.C.R. I-3359, at ¶ 69).

13

United States v. Microsoft Corp., 253 F.3d 34, 59 (D.C. Cir. 2001).

14

See infra notes 58–67 and accompanying text.

15

KIP W. VISCUSI ET AL., ECONOMICS OF REGULATION AND ANTITRUST 79–99 (2005); Joseph Far-

rell & Michael L Katz, The Economics of Welfare Standards in Antitrust,2C

OMP.POL’YINT’L

3 (2006).

2020 / Redefining Monopolization 171