Making Sense of Monopolization

• Author: Daniel Francis
• Position: Assistant Professor of Law, NYU School of Law; formerly Deputy Director and Associate Director for Digital Markets, Bureau of Competition, Federal Trade Commission
• Pages: 779-839

MAKING SENSE OF MONOPOLIZATION

D

ANIEL

F

RANCIS

*

For monopolists of all kinds, the monopolization offense in Section 2 of the

Sherman Act defines the contour between lawful competition and illegitimate

foul play. It applies to everything from pricing decisions to acquisitions of

promising rivals. It sets the ground rules for our most prominent and powerful

digital platforms, and for monopolists throughout our economy. And yet we

are strikingly unsure of what it really means.

The monopolization offense requires monopoly power plus a conduct ele-

ment, which the Supreme Court defined seminally in United States v. Grinnell

Corp. as “the willful acquisition or maintenance of [monopoly] power as dis-

tinguished from growth or development as a consequence of a superior prod-

uct, business acumen, or historic accident.”

1

But this definition makes no

sense: virtually every business seeks to win share from competitors—it will-

fully seeks monopoly—including through superior products and business acu-

* Assistant Professor of Law, NYU School of Law; formerly Deputy Director and Associate

Director for Digital Markets, Bureau of Competition, Federal Trade Commission. I am im-

mensely grateful to the village of friends and colleagues who have commented on earlier drafts,

either in writing or in workshops, or helped inform my views about Section 2 in other ways.

Particular thanks to (among others): Jon Baker, Oren Bar-Gill, Will Baude, Lisa Bernstein, Erin

Blondel, Anu Bradford, Steve Calkins, Krisha Cerilli, Felix Chang, Dale Collins, Ian Conner,

Magali Eben, Einer Elhauge, Richard Fallon, Harry First, Eleanor Fox, Thomas Frampton, Patri-

cia Galvan, Jack Goldsmith, Geoffrey Green, Hiba Hafiz, Chris Havasy, Joseph Heath, Scott

Hemphill, Bruce Hoffman, Max Huffman, Louis Kaplow, Bob Lande, Mark Lemley, Christopher

Leslie, Doug Melamed, John Newman, Alison Oldale, Taylor Owings, Rohan Pai, Sanjukta Paul,

Noah Phillips, Steve Salop, Fiona Scott Morton, Joe Simons, Danny Sokol, Chris Sprigman,

David Stein, Thomas Streinz, Sean Sullivan, Spencer Weber Waller, Larry White, Abe Wickel-

gren, Nathan Wilson, and Ramsi Woodcock, as well as an anonymous peer reviewer. I am in-

debted to Gr´ainne de B´urca, Richard Epstein, Barry Friedman, and Joseph Weiler for many

kindnesses; to Donald Regan for inspiring the title; to many former colleagues at the FTC for

countless discussions; and to participants at workshops at Univ. of Arkansas-Little Rock, Brook-

lyn Law School, Cambridge Univ., Univ. of Chicago, Univ. of Florida, Georgetown Univ.,

Harvard Univ., Univ. of Maryland, Univ. of Michigan, NYU, Univ. of South Carolina, the Uni-

versity of Southern California, and Yale Univ. for invaluable input. Disclosure: while at the FTC

I participated in many of the digital antitrust matters described below, including FTC v.

Facebook and FTC v. Qualcomm. Of course, this article relies only on public materials.

1

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

779

780

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NTITRUST

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OURNAL

[Vol. 84

men. No one thinks that “willfulness” in chasing monopoly is bad or rare.

Every monopolization defendant claims that its conduct facilitates “superior”

operation. And if the use of “acumen” is exculpatory, then what remains? The

first half of the Court’s binary is not necessarily bad, the second part is not

necessarily good, and they are in no real tension.

Confusion breeds confusion: puzzles pervade our monopolization cases. In

United States v. Microsoft Corp., the D.C. Circuit held that a plaintiff need not

prove what would have happened but for the defendant’s conduct; a few years

later the same court appeared to dismiss the FTC’s case in Rambus Inc. v.

FTC for failure to do just that.

2

In McWane, Inc. v. FTC, the Eleventh Circuit

held that monopolization requires only consumer harm, not competitor harm;

in FTC v. Qualcomm, the Ninth Circuit indicated the contrary.

3

The Second

Circuit has held that monopolization liability is reserved for conduct lacking

any legitimate business purpose; other circuits have suggested that intention is

irrelevant.

4

Some courts suggest that Section 2 always demands weighing

harms and benefits; others disdain that approach.

5

And so on.

The sorry state of monopolization doctrine has been an open secret in anti-

trust circles for many years. A few years ago, Thomas Lambert wryly pointed

out that the “problem with Section 2” was that “nobody knows what it

means.”

6

Ten years before that, Einer Elhauge confessed that “[i]t is time . . .

to acknowledge that the emperor has no clothes,” and that monopolization

doctrine was just a “barrage of conclusory labels.”

7

And twenty years before

that, Steven Salop and Thomas Krattenmaker condemned monopolization’s

“substantial disarray.”

8

For decades, we have managed with the help of two crutches. The first has

been doctrine: a taxonomy of micro-rules for specific practices (exclusive

dealing, tying, and so on) that rely on analogies to familiar markets and prac-

tices rather than first principles of monopolization law. The second crutch has

2

Compare United States v. Microsoft Corp., 253 F.3d 34, 79 (D.C. Cir. 2001), with Rambus

Inc. v. FTC, 522 F.3d 456, 463 (D.C. Cir. 2008).

3

Compare McWane, Inc. v. FTC, 783 F.3d 814, 835–36 (11th Cir. 2015), with FTC v.

Qualcomm Inc., 969 F.3d 974, 992 (9th Cir. 2020).

4

Compare In re Adderall XR Antitrust Litig., 754 F.3d 128, 133 (2d Cir. 2014), with SCFC

ILC, Inc. v. Visa USA, Inc., 36 F.3d 958, 969 (10th Cir. 1994), and A.A. Poultry Farms, Inc. v.

Rose Acre Farms,Inc., 881 F.2d 1396, 1402 (7th Cir. 1989).

5

Compare Microsoft, 253 F.3d at 58–59, with Novell, Inc. v. Microsoft Corp., 731 F.3d

1064, 1075 (10th Cir. 2013).

6

Thomas A. Lambert, Defining Unreasonably Exclusionary Conduct: The “Exclusion of a

Competitive Rival” Approach, 92 N.C. L. R

EV

. 1175, 1177 (2014).

7

Einer Elhauge, Defining Better Monopolization Standards, 56 S

TAN

. L. R

EV

. 253, 342

(2003).

8

Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising Rivals’

Costs to Achieve Power over Price, 96 Y

ALE

L.J. 209, 211 (1986).

2022]

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ONOPOLIZATION

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been a robust presumption of lenity in close or novel cases, driven by fears of

deterring vigorous competition, particularly in new or high-tech markets.

9

But the crutches are crumbling. Old taxonomies have lost their persuasive

grip as scholars, legislators, and the public doubt whether markets defined by

network effects, lock-in, platform dynamics, and other digital novelties should

really be approached with rules forged in markets for steel, oil, and agricul-

tural products. And the view that it is generally better to risk a bit too much

private monopoly rather than a bit too much state action has fractured entirely.

The result is deep confusion, not just about the legality of many practices

on the digital frontier, but about the standards courts, agencies, and businesses

should use to appraise them. When can a dominant social network buy an

emerging threat with competitive promise but an uncertain future?

10

When can

a dominant search engine give a hand up to its own services, and not those of

rivals?

11

When can a dominant chip manufacturer structure patent licenses in

ways that tax and suppress rivals’ sales?

12

To tackle these puzzles, we need

precisely what we lack: a clear sense of the principles at the heart of the

monopolization offense.

* * *

This article sketches the outline of a solution. It offers a reconstruction of

the monopolization offense, and particularly its conduct requirement.

13

I will

make three claims. First, I will offer an account of the neglected concept of

monopolization, specifying and distinguishing among its three separate com-

ponents: (1) a concern with a wrong called “exclusion,” as distinct from mere

competitive failure; (2) a concern with the harms of monopoly; and (3) a con-

cern to protect competitive freedom, even for monopolists. I will show that

each of these projects is deeply embedded in our tradition: in legislative his-

tory; in early adjudication before the accretion of modern doctrine; in moral

and political theory of commerce; and in our tangled modern cases. I will

argue that any plausible account of monopolization must reflect each of these

dimensions.

My second claim offers a theory of the monopolization offense that would

improve its clarity, vigor, and coherence. A monopolization plaintiff must es-

tablish, in addition to monopoly, just three elements: (1) exclusion (substantial

9

See, e.g., FTC v. Qualcomm Inc., 969 F.3d 974, 990–91 (9th Cir. 2020).

10

See FTC v. Facebook, Inc., 560 F. Supp. 3d 1 (D.D.C. 2021).

11

See Complaint, Colorado v. Google LLC, No. 1:20-cv-3715 (D.D.C. Dec. 17, 2020).

12

See Qualcomm, 969 F.3d at 997–1003.

13

The concept of monopoly presents many complexities of its own—see, e.g.,Facebook, 560

F. Supp. 3d at 15–20 (dismissing the FTC’s first complaint against Facebook)—but I will set

these aside in this article.