Overview of the Monopolizing Conduct Requirement

• Pages: 75-104

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CHAPTER IV

OVERVIEW OF THE MONOPOLIZING

CONDUCT REQUIREMENT

This chapter and the next address one of the most challenging areas of

antitrust law: the effort to identify monopolizing conduct—that is,

behavior that is illegal for a firm that possesses or seeks to acquire

monopoly power. This chapter addresses, at a general level, the meaning

of Section 2’s conduct element and the policies and tests that courts and

commentators have considered in identifying unlawful monopolizing

conduct. Chapter V reviews how the courts have addressed discrete types

of conduct such as unilateral refusals to deal, exclusive dealing, bundled

discounts, and others.

A. Development of the Section 2 Conduct Requirement

Commentators have long described defining unlawful dominant firm

conduct as “one of the most uncertain areas of antitrust.”1 Others have

compared the judicial approach to the predatory or exclusionary tests of

monopolization law as similar to how Justice Stewart approached the

definition of obscenity: “[t]hey cannot define monopolization but they

know it when they see it.”2 Disagreement over where to draw the line for

unlawful conduct is exemplified by the highly critical response of three

members of the FTC to the Antitrust Division’s September 2008 report on

single firm conduct, and the Division withdrawing the report in May 2009

upon a change in administration.3

1. Robert Pitofsky, Comments to the Antitrust Modernization Commission:

Standards for Exclusionary Behavior Under Section 2 of the Sherman Act

2 (Sept. 9, 2005).

2. Thomas E. Kauper, Section 2 of the Sherman Act: The Search for

Standards, 93 GEO. L.J. 1623, 1624 (2005).

3. See Statement of FTC Commissioners Harbour, Liebowitz, and Rosch on

the Issuance of the Section 2 Report by the Department of Justice 1 (Sept.

8, 2008) [hereinafter FTC Statement] (“[T]he U.S. Supreme Court has

declared that the welfare of consumers is the primary goal of the antitrust

76 Monopolization and Dominance Handbook

Discussed below are differing characterizations of monopolizing

conduct and the role that intent plays in each.

1. Differing Characterizations of Monopolizing Conduct

Over the years, courts and commentators have adopted a variety of

shorthand characterizations that describe conduct as permissible or

impermissible. For example, courts have often described acceptable

conduct as “normal” and unlawful strategies as “unusual” or “abnormal.”4

But complex, creative, and novel business strategies often benefit

consumers.5 As the D.C. Circuit observed in United States v. Microsoft

Corp.,6 “[w]hether any particular act of a monopolist is exclusionary, rather

than merely a form of vigorous competition, can be difficult to discern: the

laws.”); see also Karen L. Grimm, General Standards for Exclusionary

Conduct (FTC Working Paper Nov. 3, 2008) at 7-13, available at

https://www.ftc.gov/system/files/documents/public_events/section-2-

sherman-act-hearings-single-firm-conduct-related-competition/section

2generalstandards.pdf (outlining the controversy). In withdrawing the

Antitrust Division’s 2008 Report, Assistant Attorney General Varney

stated:

The Report sounds a call of great skepticism regarding the ability of

antitrust enforcers—as well as antitrust courts—to distinguish

between anticompetitive acts and lawful conduct, and raises the

related concern that the failure to make proper distinctions may

lead to “over-deterrence” with regard to potentially

procompetitive conduct. I do not share these concerns. I strongly

believe that antitrust enforcers are able to separate the wheat from

the chaff in identifying exclusionary and predatory acts.

Ass’t Atty. Gen. Christine A. Varney, Vigorous Antitrust Enforcement in

this Challenging Era, Remarks at the Center for American Progress 5-7

(May 11, 2009) (footnotes omitted) [hereinafter Varney Remarks].

4. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 608

(1985) (“conduct [not] justified by any normal business purpose”);

Instructional Sys. Dev. v. Aetna Cas. & Sur. Co., 817 F.2d 639, 649 (10th

Cir. 1987) (“Section 2 is violated when monopoly power is gained or held

by conduct constituting an abnormal response to market opportunities.”).

5. See Dennis W. Carlton & Ken Heyer, Appropriate Antitrust Policy Toward

Single-Firm Conduct: Extraction Versus Extension, 22 ANTITRUST,

Summer 2008, 50, 58).

6. 253 F.3d 34 (D.C. Cir. 2001).