Monopolization

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The term "monopolization" refers to an offense under Section 2 of the American Sherman Antitrust Act, passed in 1890. Section 2 states that any person "who shall monopolize . . . any part of the trade or commerce among the several states, or with foreign nations shall be deemed guilty of a felony." Section 2 also forbids "attempts to monopolize" and "conspiracies to monopolize."

Under long-established precedent, the offense of monopolization under Section 2 has two elements. First, that the defendant possesses monopoly power in a properly-defined market and second that the defendant obtained or maintained that power through conduct deemed unlawfully exclusionary. The mere fact that conduct disadvantages rivals does not, without more, constitute the sort of exclusionary conduct that satisfies this second element. Instead, such conduct must exclude rivals on some basis other than efficiency.

For several decades courts drew the line between efficient and inefficient exclusion by asking whether the conduct under scrutiny was "competition on the merits." Courts equated such competition on the merits with unilateral conduct such as product improvement, the realization of economies of scale, innovation, and the like. Such conduct was lawful per se, since it constituted the normal operation of economic forces that a free economy should encourage. At the same time, courts condemned as "unlawful exclusion" tying contracts, exclusive dealing, and other agreements that disadvantaged rivals. See, e.g., United States v. United Shoe Machinery Co., 110 F. 295 (D. Mass. 1953). This distinction reflected the economic theory of the time, which saw no beneficial purposes for what Professor Oliver Williamson has called non-standard contracts.

More recently, courts have retained the safe harbor for "competition on the merits." Moreover, the Supreme Court has clarified the standards governing claims of predatory pricing. At the same time, they have relaxed the standards governing other conduct by monopolists. For instance, non-standard contracts that exclude rivals are now lawful if supported by a "valid business reason," unless the plaintiff can establish that the defendant could achieve the same benefits by means of a less restrictive alternative. See Eastman Kodak v. Image Technical Services, 504 U.S. 451 (1992).

[edit] Bibliography

Philip Areeda and Donald F. Turner, Predatory Pricing and Related Practices Under Section 2 of the Sherman Act, 88 Harv. L. Rev. 697 (1975)

Herbert Hovenkamp, The Monopolization Offense, 61 Ohio St. L. J. 1035 (2000)

Thomas Piraino, Identifying Monopolists’ Exclusionary Conduct Under Section 2 of the Sherman Act, 75 NYU L. Rev. 809 (2000)

John E. Lopatka and William H. Page, Monopolization, Innovation, and Consumer Welfare, 69 George Washington University L. Rev. 367, 387-92 (2001)

Einer Elhaughe, Defining Better Monopolization Standards, 56 Stanford L. Rev. 253 (2003)

Alan Meese, Monopolization, Exclusion, and the Theory of The Firm, 89 Minnesota L. Rev. 743 (2005)