Monopolization under the Sherman Act: The Third Wave and Beyond

• Published date: 01 March 1981
• Author: John J. Flynn
• DOI: 10.1177/0003603X8102600101
• Date: 01 March 1981
• Subject Matter: Article

The Antitrust Bulletin/Spring

1981

Monopolization under the Sherman

Act: the third wave and beyond

BY

JOHN

J. FLYNN·

1

Like Gaul, monopolization litigation under section 2

of

the

Sherman Act has been divided into three parts: A first part

beginning with the Northern Securities case

of

19041and ending

with the U.S. Steel case in

1920;2

a second part, the Thurmond

Arnold era, beginning in the late 30's with the filing

of

the

ALCOA

case' and ending in the early 50's with the decision in the

United Shoe Machinery case;' and a third part beginning in the

late 60's with the filing

of

the

IBM

case by the Department

of

Justice.

~

Part

three has been kept rolling by a marked increase in

•Professor of Law, University

of

Utah, Salt Lake City, Utah.

AUTHOR'S NOTE: Stephen C. Rich, J.D. 1980, University

of

Utah and a

Ph.D. student in economics, University

of

Utah, assisted in the prepara-

tion

of

this article.

•Northern Securities Co. v. United States, 193 U.S. i97 (1904).

2United States v. United States Steel Corp., 251 U.S. 417 (1920).

3United States v. Aluminum Co. of America, 148 E2d 416 (2d Cir.

1945).

4United States v, United Shoe Machinery Corp., 110 ESupp. 295

(D. Mass. 1953), aff''d

per

curiam, 347 U.S. 521 (1954). Later opinions

on remedy

391

U.S. 244 (1968); 1969 Trade Cases 172,688 (D. Mass.)

(consent decree). See discussion, infra note 34.

5United States v, IBM Corp., 4

TRADE

REG.REB

(CCH) 145,070

Case 2039 (filed S.D.N.Y. 1969) (No. 69-2(0). For an analysis of the

IBM case, see L. Weiss, The Structure-Conduct-Performance Paridigm

and Antitrust, 127

U.PA.L.REY.

1104 (1979).

©1981by Federal Legal Publications, Inc.

2The antitrust bulletin

private treble damage litigation alleging monopolization, the

filing of a renewed attempt to dissolve A.

T.&T.

under section 2 by

the Antitrust Division" and monopolization cases brought against

Exxon,' du Pont" and the cereal companies" by the ET.C. In

other forums, wave III has gained added impetus from legislative

proposals aimed at economic concentration, 10 and the recommen-

dations

of

the National Commission for the Review

of

Antitrust

6United States v. American Telephone & Telegraph Co., [1970-79

Transfer Binder]

TRADE

REG.RER

(CCH) 145,074, Case 2416 (D.D.C.

1974). The case seeks divestiture of Western Electric and the Long Lines

Division. A similar prior case against A.

T.&T.

was settled by a consent

decree short of divestiture. United States v. Western Electric Co., 1956

Trade Cases 168,246 (D.N.J. 1956). The procedure for settling the case

and the relief achieved are examined and severely criticized in

REPORT

TO

THE

PRES.

AND

THE

ATTORNEY

GENERAL

OF

THE

ANTITRUST

SUBCOMMITTEE

OF

THE

HOUSE

JUDICIARY

COMMITTEE

ON

THE

CONSENT

DECREE

PROGRAM

OF

THE

DEPARTMENT

OF

JUSTICE

(1959).

7Exxon Corp., [1973-76 Transfer Binder]

TRADE

REG.REP.

(CCH)

§20,388 (1973).

8E.!. du

Pont

de Nemours & Co., 3

TRADE

REG.RER

(CCH) 121,770

(1980) (final order and opinion dismissing complaint). The du Pont

opinion is a significant attempt to monopolize decision by the Commis-

sion. The opinion was issued after completion of this manuscript. While

the violations charged in the complaint justify treating the case as

beyond the scope of this article, the opinion deals extensively with

monopolization precedent and many of the conduct issues discussed

elsewhere in this article. Appropriate footnote references to du Pont

have been inserted where relevant to the text analysis of other leading

wave III decisions.

9Kellogg Co.,

[1970-73

Transfer Binder]

TRADE

REG.RER

(CCH)

, 19,898 (1972).

10 See S. 1167, 93d

Congo

1st Sess. (1973); Hearings on the Industrial

Reorganization

Act

Before the Subcomm. on Antitrust and Monopoly

of

the Senate Judiciary Comm. 93d-94th

Congo

(1973-76);

GOLDSCHMID,

MANN

&

WESTON

(eds.),

INDUSTRIAL

CONCENTRATION:

THE

NEW

LEARNING

ch. 7 (1974); Note, The Industrial Reorganization Act:

An

Antitrust

Proposal to Restructure the American Economy, 73

COLUM.L.REV.

635

(1973); Comment, A Legislative Approach to Market Concentration:

The Industrial Reorganization Act, 24

SYRACUSE

L.REV.

1100 (1973).

Monopolization :3

Laws

and

Procedures suggesting relaxation

of

the

traditional legal

test for attempts to monopolize

and

congressional study

of

no

conduct monopolization proposals.

II

Some have called these distinct periods

of

section 2monopoli-

zation activity "waves,"12 thereby invoking

the

analogy

of

distinct

oscillations

of

a large mass surging to

and

fro. Monopolization

litigation might also be likened to separate

and

distinct "erup-

tions"

of

a

volcano-which

then subsides to a period

of

peaceful

slumber when everyone enjoys its presence, ignores its potential,

and

occasionally meditates

about

the

consequences should a new

eruption ensue. Whether they be called "waves" or "eruptions,"

each period

of

monopolization litigation has been followed by a

relative calm where little or no monopolization litigation takes

place."

The

ensuing

storm

after the calm, usually leads doctrine

off

in a new direction, presents new procedural

and

remedial

difficulties,

and

has a unique quality all its own.

It

shall be the

purpose

of

this article

to

survey

the

three distinct waves

of

monopolization litigation which have

taken

place under the Sher-

man

Act, with emphasis

upon

the current wave

and

its new

directions, its peculiar difficulties,

and

its unique qualities.

II

INational Commission for the

Review

of Antitrust Laws and

Procedures, ch, 8

(1979)

(hereinafter cited NCRALP). The papers

submitted to NCRALP on section 2 by various witnesses are reprinted

in 48

ANTITRUST

L.J.

813-905

(1979).

See also, Applebaum, Shenefield,

Blecher &Bork, Debate: Should the Sherman

Act

Be Amended to

Broaden the Offense

of

Attempt to Monopolize, 48

ANTITRUST

L.J.

1433

(1979).

12 Shepherd, The Economics: A Pep

Talk,

41

ANTITRUST

L.J. 595, 598

(1972).

13 Id. at 595. Surveys of the evolution of monopolization standards

and analysis of the current status of the law may be found in 3

P.

AREEDA

& D.

TURNER,

ANTITRUST

LAW

chs. 6 &7

(1978);

L.

SULLIVAN,

ANTITRUST

ch. II

(1977).