Specfic Forms of Monopolizing Conduct

Chapter IV discussed the general conduct element of Section 2 and the
policies and tests that courts and commentators have considered in
identifying unlawful monopolizing conduct. This chapter reviews how the
courts have addressed discrete types of conduct such as unilateral refusals
to deal, exclusive dealing, and bundled discounts.
A. Predatory Behavior
1. Predatory Pricing
In the United States, a lawful monopolist is free to charge as high a
price as it wishes.1 Sometimes, however, a monopolist may choose, for
strategic reasons, to sell below the monopoly price. For example, a
monopolist with some competition may try to maximize its profits over the
medium or the long run by choosing to price lower than the short-run
monopoly price.2 Moreover, a monopolist faced with potential
competition might choose, for the sake of maximizing long-run profits, to
adopt a “limit pricing” strategy—picking a price above the competitive
price but less than the monopoly price, which is still profitable to the
monopolist yet low enough to deter potential competitors from entering
the market.3 Alternatively, a monopolist might choose to “invest” in a
predatory strategy, temporarily selling its products for less than it costs to
make them in order to drive competitors from the market, cripple them, or
punish them severely for aggressive competition. Because such a pricing
strategy involves deliberate losses, it is not sustainable in the long run, and
1. See Verizon Commc’ns v. Law Offices of Curtis V. Trinko, 540 U.S. 398,
407 (2004).
¶ 722 (4th ed. 2015).
3. See id. ¶ 736b1.
106 Monopolization and Dominance Handbook
makes economic sense only if the investment in predation can later be
recouped through future monopoly profits.4
It is, however, fundamental that “[c]utting prices in order to increase
business often is the very essence of competition.”5 How should the
courts—giving due consideration to the public policies discussed in
Chapter IV.C.2.a—decide when strategically low pricing is monopolizing
conduct and when it is not?
Brooke Group,6 decided by the Supreme Court in 1993, remains the
leading case.7 There the Court declared, “[t]hat below-cost pricing may
impose painful losses on its target is of no moment to the antitrust laws if
competition is not injured.”8 By contrast, the “essence” of predatory
pricing—strategically low pricing as a form of prohibited conduct—is that
“[a] business rival has priced its products in an unfair manner with an
object to eliminate or retard competition and thereby gain and exercise
control over prices in the relevant market,”9 that is to say, to exercise
monopoly power.
4. Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 588–89
5. Id. at 594.
6. Brooke Grp. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993).
7. Brooke Group’s holding related to the standards of liability for
discriminatory predatory pricing in a case brought by a competitor of the
discriminating firm under the Robinson-Patman Act, 15 U.S.C. § 13(a).
But the Court observed that actionable injury to competitors under the
Robinson-Patman Act “is of the same general character as the injury
inflicted by predatory pricing schemes actionable under § 2 of the Sherman
Act.” Id. at 221. In LePage’s Inc. v. 3M Co., 324 F.3d 141, 151 (3d Cir.
2003), decided ten years after Brooke Group, the Third Circuit asserted
that “nothing in [Brooke Group] suggests that its discussion of the issue is
applicable to a monopolist with its unconstrained market power.” Four
years later, however, the Supreme Court noted that “[i]n Brooke Group, we
considered what a plaintiff must show in order to succeed on a claim of
predatory pricing under § 2 of the Sherman Act” and that, “the standard
adopted in Brooke Group applies to predatory-pricing claims under § 2 of
the Sherman Act.” Weyerhaeuser Co. v. Ross-Simmons Hardwood
Lumber Co., 549 U.S. 312, 319, n. 1 (2007); see also Pac. Bell Tel. Co. v.
linkLine Commc’ns, 555 U.S. 438, 451–52 (2009).
8. Brooke Grp., 509 U.S. at 224.
9. Id. at 221.
Specific Forms of Monopolizing Conduct 107
The Court might have left things there, simply letting the trier of fact
determine, on a case-by-case basis, whether each challenged case of
strategically low pricing was likely to lead to monopoly power. But the
Court was concerned that, without a more limited and specific standard,
legitimate price competition might be deterred by frequent allegations of
predatory pricing. It reiterated an earlier observation that “‘predatory
pricing schemes are rarely tried, and even more rarely successful,’”10
adding that “the costs of an erroneous finding of liability are high . . . It
would be ironic indeed if the standards for predatory pricing liability were
so low that antitrust suits themselves became a tool for keeping prices
Accordingly, Brooke Group established two necessary elements for a
predatory pricing claim. Reasoning that “[a]s a general rule, the
exclusionary effect of prices above a relevant measure of cost either
reflects the lower cost structure of the alleged predator, and so represents
competition on the merits, or is beyond the practical ability of a judicial
tribunal to control without courting intolerable risks of chilling legitimate
price-cutting,”12 the Court held, “[f]irst, a plaintiff seeking to establish
competitive injury resulting from a rival's low prices must prove that the
prices complained of are below an appropriate measure of its rival’s
costs.”13 The “second prerequisite to holding a competitor liable under the
antitrust laws for charging low prices is a demonstration that the
competitor had a . . . dangerous probability, of recouping its investment in
below-cost prices.”14
Post-Brooke Group case law developments show that the Supreme
Court’s intent to limit predatory pricing litigation has proved to be
effective: such litigation is now relatively rare, and generally
10. Id. at 226 (quoting Matsushita, 475 U.S. at 589).
11. Id. at 226–27.
12. Id. at 223.
13. Id. at 222.
14. Id.

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