Refusal to deal

A. Introduction
This chapter focuses on antitrust issues created when a supplier
terminates or refuses to deal with a competitor. A plaintiff bringing a claim
in this narrow area must show that not only did the defendant (with
monopoly power or pursuant to a conspiracy) refuse to deal, but that doing
so was not economically rational,1 except as a means to harm competition.
Antitrust lawsuits alleging a “refusal to deal” may arise within what is
called the “essential facilities” doctrine. This doctrine provides that it may
be an antitrust violation when an entity with some degree of market power
that controls an “essential” facility or resource refuses to provide
competitors with access to that resource. Under current federal antitrust
law, very few refusals to deal are actionable. A termination or refusal to
deal by one company is litigated primarily under Section 2 of the Sherman
Other chapters address antitrust issues created when a supplier
terminates a distributor to enforce an anticompetitive restriction that
improperly lessens the ability of the supplier’s competitors to reach the
market or the ability of its distributors to compete. This chapter examines
an antitrust claim brought against a supplier that improperly lessens the
ability of its competitors to reach the market by denying them access to
the supplier’s own products and services. An added complication arises
when the supplier is refusing to supply or license patented products.
1. As explained more fully below, there is much debate about the most
appropriate test to show that a defendant’s refusal to deal was not
economically rational, except as a means to harm competition.
2. 15U.S.C. § 2 (2012). A refusal to deal pursuant to a conspiracy, such as a
group boycott, has separate and less exacting requirements under § 1 of the
Sherman Act. 15U.S.C. § 1 (2012). The analysis in such cases is whether
the conspiracy existed, rather than of the effects of the refusal to deal.
324 Antitrust Law and Economics of Product Distribution
B. The Basics of Refusals to Deal
1. An Exception to the General Rule
A unilateral refusal to deal can form the basis for the exclusionary
conduct element of Section 2 of the Sherman Act. Under current law,
however, the circumstances under which that can occur are very limited.
The general rule3 is that antitrust law generally does not prohibit a
competitor from refusing to deal with its competitors.4 This general rule,
however, is not unqualified. This chapter will focus on the exceptions to
the general rule. The refusal-to-deal doctrine, as explained by the Supreme
Court in Verizon Communications v. Law Offices of Curtis V. Trinko,
LLC,5 requires that a monopolist alter its profitable relationship with a
competitor, sacrificing short-term profits, to achieve an anticompetitive
2. Monopoly Power
The exceptions to the general rule require the supplier to have
monopoly power in the goods and services market that it is refusing to
supply to its competitor. One challenge is to properly define the market in
3. “In the absence of any purpose to create or maintain a monopoly, the
[Sherman] [A]ct does not restrict the long recognized right of trader or
manufacturer engaged in an entirely private business, freely to exercise his
own independent discretion as to the parties with whom he will deal.”
United States v. Colgate & Co., 250U.S. 300, 307 (1919).
4. Id. at 411 (“[W]e do not believe that traditional antitrust principles justify
adding the present case to the few existing exceptions from the proposition
that there is no duty to aid competitors.). See also Phillip Areeda, Essential
Facilities: An Epithet in Need of Limiting Principles, 58 ANTITRUST L.J.
841, 853 (1989) (“No court should impose a duty to deal that it cannot
explain or adequately and reasonably supervise. The problem should be
deemed irremedial (sic) by antitrust law when compulsory access requires
the court to assume the day-to-day controls characteristic of a regulatory
5. 540 U.S. 398 (2004) (“The unilateral termination of a voluntary (and thus
presumably profitable) course of dealing suggested a willingness to forsake
short-term profits to achieve an anticompetitive end. Similarly, the
defendant's unwillingness to renew the ticket even if compensated at retail
price revealed a distinctly anticompetitive bent.). Id. at 409 (citation

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