Authors: Molly Donovan & Luke Hasskamp
Liv is 8. She just moved to town from out of state and has 3 new neighbor friends Paul, Greg and Adam (“PGA”). The PGA kids seem very nice and well mannered. They wear pastels. And the coolest thing about them: they have a mini-golf course they built in their backyard years ago. It is touted as the best and most exclusive place for kids to play golf and rightly so. All the best mini golfers play there and only there. Frankly, there is no real competition for mini golf in the county.
Even though Liv is new to town, she thinks she has the chops to build a mini-golf course that rivals her neighbors’. Her house is bigger, her backyard is bigger, her parents will buy better equipment, and Liv is going to award the winner of each round a very fancy prize. Kids are thrilled—and one by one, even the best mini golfers start trying Liv’s course.
PGA is not happy. Stunned that Liv would challenge their longstanding position as the best and only course in town, they unilaterally announce that any kid who chooses to play in Liv’s yard will be banned from their original and still most popular and reputable course. Players must choose: one course or the other, but not both.
(The antitrust lawyer is growing concerned. This sounds like a monopolist trying to bully an emerging competitor by cutting off access to customers. What’s worse, Paul and Greg might be depriving kids of meaningful choice when it comes to mini golf.)
And for sure, the kids are upset, but they’re also a bit confused. On the one hand, any business owner has the right to choose with whom they will deal, right? On the other hand, PGA’s decision to punish kids who want to play at Liv’s every once in a while seems wrong.
The kids call their antitrust lawyer, and here’s what she says: you all should file a class action on behalf of every kid in town who wants to play at both courses and have a real choice when it comes to mini golf competition. The PGA contingent is not competing on the merits, that is, they are not getting mini golfers to come to their course by making it better. Instead, they are monopolists who are using their dominance unfairly to box out a nascent competitor. I’ll represent you, although I’m not sure what your monetary damages are. We could try to get an injunction but I’ll need a retainer for that.
Unable to raise enough funds for the retainer, the kids simply call up PGA demanding that their ban be ceased or else nobody will sit with them at lunch or play with them at recess. That did the trick and the ban was called off immediately. Now kids can play at both mini golf courses!
Bottom line: If you’re arguably a dominant company—even in a small, niche area—you might be a monopolist. If you do dominate (or arguably dominate) a particular market, and if you engage in conduct that’s anticompetitive with no procompetitive justification—that is, try to do things to protect your monopoly—you could raise the specter of antitrust scrutiny. You can learn more about monopolization on this podcast.
Moral of the Story:
To resolve your antitrust disputes, sometimes litigation isn’t necessary and sometimes it is.