Articles Posted in Exclusionary Conduct

Apple’s Gemini-Siri Deal Is the Next Microsoft Antitrust Case, Not the Next App Store Fight

May 14, 2026 | Bona Law PC

The Gate to the Kingdom May Be Closing for Good: Apple Puts Google Inside Siri

On January 12, 2026, Apple and Google announced a multi-year deal—reported at roughly $1 billion a year—under which a custom Google Gemini model will run as the backend “brain” of the rebuilt Siri and the next generation of Apple Intelligence. Apple plans to unveil the new assistant at WWDC on June 8, 2026, and ship it with iOS 27 in September. Apple’s own on-device Foundation Models will handle simpler, privacy-sensitive tasks. Heavier queries will route to Gemini on Apple’s private cloud. Siri’s cognitive core will no longer be Apple’s. It will be Google’s.

Meanwhile, ChatGPT—the model Apple spent 18 months positioning as the future of iPhone AI, and the one still at the center of the xAI antitrust lawsuit pending in the Northern District of Texas—continues to sit where it has always sat: in a separate, opt-in, off-by-default layer that users have to turn on themselves. In iOS 27, Apple will expand that layer into an “Extensions” framework that lets users pick from Claude, Grok, Copilot, Perplexity, and a user-selectable Gemini chatbot app alongside ChatGPT.

On the surface, the Gemini deal looks like Apple conceding ground—admitting it cannot build a frontier AI model of its own and paying Google to fill the gap. It is not. Apple does not fear a better chatbot. It fears losing the user to one. By routing Siri’s cognition through a supplier Apple controls contractually, it keeps the interface, the invocation, the defaults, the billing, and the brand—everything that makes an operating system a platform—while outsourcing the only layer it never wanted to own: the AI model. It is classic Apple, but this time with Google as an ally instead of a threat.

Where The xAI Case Stands

Elon Musk’s X Corp. and xAI sued Apple and OpenAI on August 25, 2025, in the Northern District of Texas.

The theory of harm has two layers. First, ChatGPT’s integration into iOS, iPadOS, and macOS—announced in June 2024—delivers billions of iPhone-originated prompts to a single model. Second, the complaint alleges that Apple deprioritized rival chatbots in App Store rankings, making it harder for Grok and others to reach users even outside the system layer.

In late September 2025, Apple and OpenAI moved to dismiss. Apple argued the deal is “expressly not exclusive.” OpenAI called the suit part of a “lawfare” campaign. Judge Mark T. Pittman denied both motions on November 13, 2025, in a one-page order signaling the case is “more well-suited for adjudication through a motion(s) for summary judgment.” Discovery opened on October 10, 2025, and closes on May 22, 2026.

Two rulings tell us the real story.

The source-code ruling: Courts don’t want to become engineers, they just want evidence of platform foreclosure

On January 22, 2026, Magistrate Judge Hal R. Ray Jr. denied X’s motion to compel OpenAI to produce ChatGPT’s source code. X argued it needed the code to rebut any defense of lack of feasibility, to establish whether Apple could integrate Grok into the Apple iOS, and whether it would be feasible to integrate multiple AI products from various providers on the iPhone. The court disagreed on both relevance and proportionality.

On relevance, the order is blunt: “At this stage, it is unclear how the source code is relevant to whether Apple unlawfully excluded Grok from its products and conspired with the other defendants to create a monopoly.” On proportionality, the court noted that OpenAI had already produced API documentation and offered to stipulate that neither side would rely on proprietary source code. X refused the compromise. The court refused the production.

For a platform-exclusion case, that ruling is not a setback. It is a roadmap. Courts do not want plaintiffs dissecting competitor IP to infer what could have happened. They want direct evidence of platform misconduct—integration terms, routing logic, default settings, App Store treatment. That is where antitrust liability lives in a case like this. The court said so in plain terms, and future plaintiffs should take the hint.

The April 2026 motion to compel: Valuation and training data

X filed a second motion to compel on April 10, 2026, this one aimed squarely at OpenAI’s document production. The motion accuses OpenAI of having “persistently evaded its discovery obligations,” noting that OpenAI had produced 7,475 documents compared with X’s 32,116. The requested materials include valuation studies, financial projections through 2030, ChatGPT usage by country, and documents about OpenAI’s use of X data to train its models.

The valuation request is the one to watch. X tells the court that OpenAI’s valuation grew by more than $500 billion in the past year—from $300 billion at the end of March 2025. X argues the jump “does not make sense unless OpenAI and its investors understand that ChatGPT’s exclusive deal with Apple is cementing OpenAI’s dominance.” That is a causation theory built on investor behavior, not technology.

The training-data request matters for a different reason. OpenAI has defended the case in part by arguing that Grok’s foreclosure from iPhone-originated prompts is insubstantial because xAI has asymmetrical access to X data. X’s response is direct: if OpenAI also trains on X data, the asymmetry disappears. That question—who gets to learn from where—sits at the center of every theory of harm in generative AI.

Both motions, taken together, ask the court to analyze platform foreclosure through evidence: deal terms, integration architecture, valuation impact, data flows. None of it is specific to OpenAI nor depends on getting inside OpenAI’s code.

That same framework applies to Gemini.

Gemini Isn’t Apple’s Competitor. It’s Apple’s Supplier.

Apple’s decision to build Siri on Gemini at the backend, while offering third-party chatbots through Extensions on top, reshapes the competitive picture more than any filing in Texas has.

Apple did not retreat from AI. It relocated AI. Every layer a platform needs—distribution, defaults, billing, invocation, user interface, identity—remains Apple’s. When a user says, “Hey Siri” and Gemini answers, Apple delivers the answer. The supplier is invisible. Apple owns the user relationship.

That is the Google Search playbook applied one floor up in the stack. The existing Apple–Google deal to make Google the default search engine in Safari has existed for over a decade, with payments roughly reaching $18–$20 billion a year in the early 2020s. Google delivered the search results. Apple kept the browser, the UI, the defaults, and the customer. Nobody ever thought of Safari as “the Google browser.” That deal survived the U.S. v. Google antitrust trial not because it was invisible, but because it proved how much Apple gained by making a dominant rival pay for access instead of competing on equal terms.

The Gemini arrangement reuses the same design. At the foundational layer, Gemini is Siri’s cognitive backend—contractual, invisible, and not subject to user choice. At the visible layer, the iOS 27 Extensions framework lets users swap among ChatGPT, Claude, Grok, Perplexity, and a Gemini chatbot app for certain requests. Apple will point to that second layer as evidence of openness. But the first layer is where platform control actually lives. Whatever model a user picks through Extensions runs on top of an infrastructure Apple has already built around Gemini. Apple does not compete with Gemini. Apple neutralizes it by absorbing it. History doesn’t repeat itself, but it often rhymes.

Forget the App Store. This is Microsoft All Over Again

The App Store line of cases is a distraction here. The real analogue is the Microsoft browser and search monopolization litigation, both in the United States and the EU.

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What the Fire Apparatus MDL Teaches Every Acquisition-Driven Company About Section 2 Risk

May 7, 2026 | Bona Law PC

Author: Aaron Gott

Seven U.S. cities have filed antitrust suits in five weeks against two manufacturers of “fire apparatus”—and the lawsuits are consolidating into a federal multidistrict litigation in the Eastern District of Wisconsin.

The case is about fire trucks. If you have ever been the parent of a five-year-old, you probably have heard about just how awesome fire trucks can be. But you probably don’t make fire trucks or use them in your business.

You should still take note of this litigation. Especially if you’re in private equity, at an acquisition-driven company, or serve markets involving specialized products or institutions like municipalities.

The defendants—REV Group and Oshkosh Corporation’s Pierce Manufacturing subsidiary, along with several entities connected to private equity investor American Industrial Partners—are accused of violating Sections 1 and 2 of the Sherman Act and Sections 3 and 7 of the Clayton Act. The theory is straightforward: through a series of acquisitions, two players came to dominate the fire apparatus market, and the alleged result is what antitrust lawyers call an “acquisition monopoly.”

This is not a new legal theory, but it is a legal theory that, just a few years ago, was unlikely to turn into a major MDL. A plaintiff’s burden on a monopolization claim under Section 2 is historically much more difficult to meet than a price-fixing claim under Section 1 because the latter is per se illegal, requiring no proof of anticompetitive effect, and face fewer doctrinal hurdles. So the antitrust class plaintiffs’ bar rarely brought them.

That’s changing, and acquisition-based monopolization claims could be a driving factor. The fire apparatus MDL is an example: just look at the pace at which top plaintiffs’ firms are filing cases, the involvement of municipalities as plaintiffs, and the rapid MDL consolidation. This could be a new era of sprawling antitrust blockbusters not centered on allegations of a price-fixing cartel.

Here is what you need to understand about acquisition monopolies.

What “Acquisition Monopoly” Actually Means

Section 2 of the Sherman Act prohibits monopolization—defined as (1) the possession of monopoly power in a relevant market, and (2) the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of superior product, business acumen, or historical accident.

The word “willful” is where acquisitions get complicated. Courts have long recognized that a company can violate Section 2 not by outcompeting rivals, but by buying them. Where each acquisition is a deliberate step in a strategy to eliminate competition and entrench market dominance, the cumulative pattern can satisfy Section 2’s willfulness requirement even if any individual deal was commercially rational on its face.

The Clayton Act adds another layer. Section 7 prohibits any acquisition—of stock or assets—where the effect “may be substantially to lessen competition, or to tend to create a monopoly” in any line of commerce or any section of the country. Note the word “may.” Section 7 is forward-looking: it catches transactions at the point where competition might be substantially harmed, not only after the damage is done. When a series of acquisitions is alleged, plaintiffs can argue both that individual deals violated Section 7 as they occurred and that the pattern of acquisitions collectively violates Section 2.

That is the double-barrel structure: Clayton Act Section 7 targets the deals as they happened; Sherman Act Section 2 targets the market power that resulted. Both claims are in the fire apparatus complaints.

The Specialized Market Problem

Antitrust liability under Section 2 depends critically on how the relevant market is defined. Market concentration and power can more easily be established where product specifications are highly customized, procurement cycles are long, and the number of qualified suppliers is small by nature.

Fire apparatus is that kind of market. Municipal fire departments operate under precise technical specifications—apparatus must meet NFPA standards, comply with state fire codes, and satisfy local procurement requirements. Fire trucks are not commodity equipment. The design, engineering, and production timelines make this a market with high barriers to entry, long customer relationships, and limited competitive alternatives.

Plaintiffs in specialized-equipment cases have an easier time with market definition because the product’s own characteristics draw the boundary. When you make the only commercially viable product for a specific application—or one of two—that fact does much of the plaintiffs’ work and makes it harder for defendants to argue a broader market such that monopoly power disappears.

How Courts Evaluate Roll-Up Claims

Plaintiffs’ antitrust lawyers have learned how to structure acquisition-monopoly cases, and the template is worth understanding.

The theory typically runs like this: defendant or its PE sponsor conducted a buy-and-build strategy, acquiring companies A, B, C, and D over a period of years; each acquisition eliminated a meaningful competitor; post-acquisition, defendant raised prices, reduced product quality, or restricted output; and the cities or businesses that purchased the product paid more than they would have in a competitive market.

Courts do not require plaintiffs to prove that every individual acquisition was anticompetitive. The question is whether the acquisitions, viewed as a course of conduct, reflect a willful strategy to acquire monopoly power. Internal communications—board materials, deal memos, strategic plans—that discuss market consolidation, competitor elimination, or pricing power post-acquisition are among the most damaging documents defendants face in discovery.

Private equity creates a particular documentation problem here. PE sponsors routinely model acquisitions in terms of EBITDA multiples, synergies, and market positioning. Investor presentations may explicitly reference competitor acquisition as a strategy for pricing power. That framing, which is entirely normal in PE deal documents, can look incriminating in an antitrust complaint. The plaintiffs in fire apparatus cases almost certainly obtained public filings, investor presentations, and press releases in which the defendants’ market consolidation strategy was described in terms that plaintiffs’ counsel will characterize as an admission.

Private Plaintiffs, Treble Damages, and the Municipal Angle

What makes the fire apparatus MDL structurally significant is the identity of the plaintiffs: cities. Municipal governments purchase specialized equipment through formal procurement processes, maintain records of every competitive bid, and have institutional incentives to pursue antitrust damages aggressively. Unlike a private commercial buyer who might want to preserve a supplier relationship, a city has no such constraint. Seven cities have filed antitrust lawsuits in five weeks. Others almost certainly will.

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Beyond the DOJ Complaint: Potential Exclusionary Conduct Theories in the Apple Ecosystem

May 4, 2026 | Bona Law PC

Authors: Pat Pascarella & Luke Hasskamp

Recent proceedings involving Apple Inc.—including the U.S. Department of Justice case and Epic Games v. Apple—together with developments in AI markets, suggest an evolving framework for platform-focused antitrust analysis. This article considers how those threads may fit together.

I. The DOJ Has Done Substantial Groundwork

Begin with market power. In U.S. v. Apple, the district court accepted as plausible a U.S. smartphone market in which Apple holds roughly 65%—now closer to 70%—reinforced by barriers to entry, network effects, and switching costs.

The DOJ also presents an alleged pattern of exclusionary conduct: the repeated neutralization of technologies that reduce platform dependence, including middleware, super apps, cloud streaming, smartwatches, messaging, and digital wallets. According to the complaint, each time a product threatened to make device choice less consequential, Apple constrained or neutralized it. If this allegation is supportable, such a pattern could address concerns about improperly “punishing success.”

II. The Markets Apple Controls at 99 Percent

If a higher market share is needed, the more compelling market is not some smartphone submarket. Rather, it will be markets Apple controls at 99 percent: the iOS functionalities and apps themselves. While not every function is a separate product, some may well be—particularly those Apple allegedly targets.

Epic v. Apple is instructive on this point, and not fatal. The court did not hold that iOS-tethered markets are inherently non-cognizable—only that Epic failed to establish that consumers lacked awareness of iOS restrictions and could not factor them into purchasing decisions. But those gaps seem addressable.

The full scope of any restraints—and their costs—is obscured in a dense web of contractual and technical restrictions. No reasonable consumer could anticipate the extent to which app review, API access, and distribution control could be wielded against rivals. Nor should antitrust liability turn on whether consumers anticipated unlawful conduct.

Even if consumers had advance knowledge of such restraints, a single-brand market is not foreclosed. Apple’s own counsel acknowledged in Epic that consumers entering the iOS ecosystem cannot predict downstream costs related to app distribution, in-app payments, or aftermarkets. If the costs of any restraints are unknowable at the time of purchase, foremarket competition cannot discipline aftermarket conduct. The remaining elements of a single-brand iOS functionality or app market also appear to be present, including allegations of intentional degradation of interoperability to maintain switching costs—without corresponding loss of share or margin.

III. CoStar, Exclusive Dealing, and the End User License Agreement

Some claims may not require pleading a single-brand market. For example, under the Ninth Circuit’s decision in CoStar v. CREXi, “substantial foreclosure” is sufficient to plead an exclusive dealing agreement.

The agreement? The EULA itself. While a web of contractual and technical restrictions might enable foreclosure, the enforceable agreement between Apple and the user is embodied in the EULA. In that sense, Apple may have supplied potential plaintiffs with the central instrument of its own potential liability.

IV. The EULA as a Negative Tie

The EULA may also provide a foundation for tying claims. Courts often resist tying theories in platform cases, frequently reasoning that coercion must be directed at consumers rather than suppliers. That argument, though contestable, is predictable.

A potential response may be that it is the EULA that effectively conditions use of the platform on the consumer’s agreement not to obtain competing products, services, or apps outside Apple’s approval.

V. Attempted Monopolization and Dangerous Probability of Success

Tying allegations also expand the analytical framework, though courts ultimately may analyze them as attempted monopolization. On the “dangerous probability of success,” a defendant such as Apple likely would invoke concerns about outdated leveraging theories. But this would not be a classic leveraging case.

Any company that demonstrates both the ability and the willingness to neutralize technologies or rivals that threaten its market position may struggle to characterize that conduct as competing on the merits. Such a pattern should reduce concerns about punishing a company simply for being successful. Where a company has demonstrated a pattern of exclusion and retains the ability to repeat it, the “dangerous probability” standard should be satisfied.

VI. Inextricably Intertwined—and Antitrust Standing

A direct monopolization claim targeting the U.S. smartphone market faces a threshold question: standing. Developers and rivals operating at the functionality level are neither customers nor competitors in the smartphone market.

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What Are the Elements for a Monopolization Claim under the Federal Antitrust Laws?

May 20, 2024 | Bona Law PC

Author: Jarod Bona

Do you or your competitor have a monopoly in a particular market? If so, your conduct or their conduct might enter Sherman Act, Section 2 territory, which we call monopolization.

If you are in Europe or other jurisdictions outside of the United States, instead of monopoly, people might label the company with extreme market power as “dominant.”

Of course, it isn’t illegal itself to be a monopolist or dominant (and monopoly is profitable). But if you utilize your monopoly power or obtain or enhance your market power improperly, you might breach US, EU, or other antitrust and competition laws.

In the United States, Section 2 of the Sherman Act makes it illegal for anyone (person or entity) to “monopolize any part of the trade or commerce among the several states, or with foreign nations.” But monopoly, by itself, is not illegal. Nor is it illegal for a monopolist to engage in competition on the merits.

If you are interested in learning more about abuse of dominance in the EU, read this article.

In the United States, monopolists have more flexibility than in the EU, but they are still under significant pressure and could face lawsuits or government investigations at any time, even when they don’t intend to violate the antitrust laws. There can be a fine line between strong competition on the merits and exclusionary conduct by a monopolist.

Here are the elements of a claim for monopolization under Section 2 of the Sherman Act:

The possession of monopoly power in the relevant market.
The willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.

These two basic elements look simple, but you could write books about them.

The Possession of Monopoly Power in the Relevant Market

To determine whether an entity has monopoly power, courts and agencies usually first define the relevant market, then analyze whether the firm has “monopoly” power within that market.

But because the purpose of that analysis is to figure out whether certain conduct or an arrangement harms competition or has the potential to do so, evidence of the actual detrimental effects on competition might obviate the need for a full market analysis. If you want to learn more about this point, read FTC v. Indiana Federation of Dentists (and subsequent case law and commentary). You can show monopoly power directly.

Sometimes this element leads to difficult questions about the line between monopoly power in a relevant market and something slightly less than that. Other times, the monopoly-power element comes down to how the court will define the relevant market. A broader market definition may create a finding of no monopoly power, while a more narrow definition means the powerful company has monopoly power.

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Ten Ways to Tell Whether You Have an Antitrust Claim

June 3, 2023 | Bona Law PC

Author: Jarod Bona

Law school exams are all about issue spotting. Sure, after you spot the issue, you must describe the elements and apply them correctly. But the important skill is, in fact, issue spotting. In the real world, you can look up a claim’s elements; in fact, you should do that anyway because the law can change (see, e.g., Leegin and resale price maintenance).

And outside of a law-school hypothetical, it usually isn’t that difficult to apply the law to the facts. Of course, what makes antitrust law interesting is that it evolves over time and its application to different circumstances often challenges your thinking. Sometimes, you may even want to ask your favorite economist for some help.

Anyway, if you aren’t an antitrust lawyer, it probably doesn’t make sense for you to advance deep into the learning curve to become an expert in antitrust and competition doctrine. It might be fun, but it is a big commitment to get to where you would need to be, so you should consider devoting your extra time instead to Bitcoin or deadlifting.

But you should learn enough about antitrust so you can spot the issues. This is important because you don’t want your company to violate the antitrust laws, which could lead to jail time, huge damage awards, and major costs and distractions. And as antitrust lawyers, we often counsel from this defensive position.

It is fun, however, to play antitrust from the offensive side of the ball. That is, you can utilize the antitrust laws to help your business. To do that, you need a rudimentary understanding of antitrust issues, so you know when to call us. Bona Law represents both plaintiffs and defendants in antitrust litigation of all sorts.

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Antitrust Group Boycotts: My Competitors are Conspiring Against Me

January 14, 2023 | Bona Law PC

Author: Jarod Bona

Do you feel paranoid? Maybe everyone really is conspiring against you? If they are competitors with each other—that is, if they have a horizontal relationship—they may even be committing a per se antitrust violation.

A group boycott occurs when two or more persons or entities conspire to restrict the ability of someone to compete. This is sometimes called a concerted refusal to deal, which unlike a standard refusal to deal requires, not surprisingly, two or more people or entities. This antitrust claim fits into Section 1 of the Sherman Act, which requires a meeting of the minds, i.e an agreement or conspiracy.

A group boycott can create per se antitrust liability. But the per se rule is applied to group boycotts like it is applied to tying claims, which means only sometimes. By contrast, horizontal price-fixing, market allocation, and bid-rigging claims are almost always per se antitrust violations.

We receive a lot of questions about potential group boycott actions. This is probably the most frustrating type of antitrust conduct to experience as a victim. Companies often feel blocked from competing in their market. They might be the victim of marketplace bullying.

You can also read our Bona Law article on five questions you should ask about possible group boycotts.

Many antitrust violations, like price-fixing, tend to hurt a lot of people a little bit. A price-fixing scheme may increase prices ten percent, for example. Price-fixing victims feel the pain, but it is diffused pain among many. Typically either the government antitrust authorities or plaintiff class-action attorneys have the biggest incentive to pursue these claims.

Perpetrators of group-boycott activity, by contrast, usually direct their action toward one or very few victims. The harm is not diffused; it is concentrated. And it is often against a competitor that is just trying to establish itself in the market. The victim is often a company that seeks to disrupt the market, creating a threat to the established players. This is common. Of course, excluding or limiting competitors from a market may also create diffused harm among customers or sellers for those excluded competitors.

The defendants may act like bullies to try to keep that upstart competitor from gaining traction in the market. Sometimes trade associations lead the anticompetitive charge.

Group boycott activity often occurs when someone new enters a market with a different or better idea or way of doing business. The current competitors—who like things just the way they are—band together to use their joint power to keep the enterprising competitor from succeeding, i.e. stealing their customers and market share.

Sometimes group-boycott claims are further complicated when the established competitors—the bullies—use their relationships with government power to further suppress competition. Indeed, sometimes the competitors actually exercise governmental power.

This is what occurred in the NC Dental v. FTC case (discussed here, and here; our amicus brief is here): A group of dentists on the North Carolina State Board of Dental Examiners engaged in joint conduct, using their government power, to thwart teeth-whitening competition from non-dentists.

This, in my opinion, is the most disgusting of antitrust violations: a group of bullies engaging government power to knock out innovation and competition. And we, at least in the past, have watched the Federal Trade Commission take a pro-active role against such anticompetitive thuggery.

Group Boycotts and ESG

An increasingly prominent example of a group boycott that you should watch for are companies that coordinate their ESG policies such that they exclude competitors that decline to accept these rigid restrictions. You can see how this could develop: A group of companies in an industry decide that they want to win some PR points by announcing ESG policies, but quickly realize that this decision increases their own costs such that they can’t offer products or services that are of competitive quality and price with those in their industry that focus on the consumer. So they coordinate together and try to stop suppliers from dealing with this consumer-friendly company, or engage in other collective tactics to exclude this lower-priced competition. There is a good chance that these actions create antitrust liability for the coordinating ESG companies. And as the FTC recently reiterated, ESG does not create antitrust immunity.

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Does an Exclusive-Dealing Agreement Violate the Antitrust Laws?

December 29, 2022 | Bona Law PC

Author: Jarod Bona

Sometimes parties will enter a contract whereby one agrees to buy (or supply) all of its needs (or product) to the other. For example, a supplier and retailer might agree that only the supplier’s product will be sold in the retailer’s stores. This usually isn’t free as the supplier will offer something—better services, better prices, etc.—to obtain the exclusivity.

If you compete with the party that receives the benefit of the exclusive deal, this sort of contract may aggravate you. After all, you have a great product, you offer a competitive price, and you know that your service is better. Then why is the retailer only buying from your competitor? Shouldn’t you deserve at least a chance? Isn’t that what the antitrust and competition laws are for?

Maybe. But most exclusive-dealing agreements are both pro-competitive and legal under the antitrust laws. That doesn’t mean that you can’t ever bring an antitrust action under exclusive dealing and it doesn’t mean you won’t win. But, percentage-wise, most exclusive-dealing arrangements don’t implicate the antitrust laws and are uncontroversial.

You can read our article about exclusive dealing at the Bona Law website here.

It is important that I deflate your expectations a little bit at the beginning like this because if you are on the outside looking in at an exclusive-dealing agreement, you are probably angry and you may feel helpless. From your perspective, it will certainly seem like an antitrust violation. And your gut feeling about certain conduct is a good first filter about whether you have an antitrust claim. What I am trying to tell you is that with regard to exclusive dealing, your gut may offer some false positives.

Of course, the market is full of exclusive or partial-exclusive dealing agreements and there are relatively few of these that turn into federal antitrust litigation. So if you see an exclusive-dealing claim in federal litigation, it may be one of the rare instances of an exclusive-dealing antitrust violation. Clients and prospective clients often contact Bona Law about exclusive-dealing agreements that are antitrust violations or close to antitrust violations. And we counsel clients on their own exclusive-dealing agreements. But people don’t call us for most varieties of exclusive dealing, which are perfectly legal under the antitrust laws.

So what is an exclusive dealing agreement?

An exclusive dealing agreement occurs when a seller agrees to sell all or most of its output of a product or service exclusively to a particular buyer. It can also happen in the reverse situation: when a buyer agrees to purchase all or most of its requirements from a particular seller. Importantly, although the term used in the doctrine is “exclusive” dealing, the agreement need not be literally exclusive. Courts will often apply exclusive dealing to partial or de facto exclusive dealing agreements, where the contract involves a substantial portion of the other party’s output or requirements. And if there are only two competitors in a market, for example, the exclusive-dealing agreement may take the form of the more powerful of the two competitors telling customers that if they want the powerful company’s products or services, they can’t also purchase from the other competitor.

You should also understand that loyalty-discount agreements and exclusive dealing agreements are, under the law, sometimes indistinguishable.

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Do the Antitrust Laws Prohibit Tying Products or Services Together for Sale?

October 29, 2022 | Bona Law PC

Author: Jarod Bona

Yes, sometimes “tying” violates the antitrust laws. Whether you arrive at the tying-arrangement issue from the perspective of the person tying, the person buying the tied products, or the person competing with the person tying, you should know when the antitrust laws forbid the practice. Even kids may want to know whether tying violates the antitrust laws.

Most vertical agreements—like loyalty discounts, bundling, exclusive dealing, (even resale price maintenance agreements under federal law) etc.—require courts to delve into the pro-competitive and anti-competitive aspects of the arrangements before rendering a judgment. Tying is a little different.

Tying agreements—along with price-fixing, market allocation, bid-rigging, and certain group boycotts—are considered per se antitrust violations. That is, a court need not perform an elaborate market analysis to condemn the practice because it is inherently anticompetitive, without pro-competitive redeeming virtues. Even though tying is often placed in this category, it doesn’t quite fit there either. Again, it is a little different.

Proving market power isn’t typically required for practices considered per se antitrust violations, but it is for tying. And business justifications don’t, as a rule, save the day for per se violations either. But, in certain limited circumstances, a defendant to an antitrust action premised on tying agreements might defend its case by showing exactly why they tied the products they did.

At this stage, you might be asking, “what the heck is tying?” Do the antitrust laws prohibit certain types of knots? Do they insist that everyone buy shoes with Velcro instead of shoestrings? The antitrust laws can be paternalistic, but they don’t go that far.

A tying arrangement is where a customer may only purchase a particular item (the “tying” item) if the customer agrees to purchase a second item (the “tied” item), or at least agree not to purchase that second item from the seller’s competitors. It is sort of like bundling, but there is an element of express coercion. When the seller prohibits the buyer from purchasing a product from the seller’s competitor, this is often called a negative tie.

With bundling, a seller may offer a lower combined price to buyers that purchase two or more items, but the buyers always have the right to just purchase one of the items (and forgo the discount). With tying, by contrast, the buyer cannot just purchase the one item; if it wants the first item, it must purchase the second or at least decline to purchase the second from the seller’s competitor.

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2021 Antitrust Developments Affecting Distribution That Flew Under the Radar

January 5, 2022 | Bona Law PC

Author: Steven J. Cernak

Recently, I was researching 2021 antitrust developments to update my Antitrust in Distribution and Franchising book and draft a long article for another publication. That research confirmed that new government antitrust enforcers and their actions gathered the most attention last year — but this blog covered those issues already, such as here and here and here. This post discusses the private antitrust litigation developments affecting distribution that I uncovered but that might have flown under your radar.

Refusal to Deal and Predatory Pricing

Despite the impression left by the mainstream media, not all antitrust cases involving claims of monopolization involved Amazon or Facebook. Other defendants faced claims of gaining or maintaining a monopoly through refusals to deal or predatory pricing schemes.

Careful readers will recall the anticipation last year that Viamedia Inc. v. Comcast Corp. might generate a Supreme Court opinion on refusal to deal issues. Here, the defendant monopolist had stopped dealing with the plaintiff after years of doing so and, allegedly, caused competitive harm. The district court had dismissed the refusal to deal claim by explicitly following the Tenth Circuit’s opinion in Novell, Inc. v. Microsoft Corp., authored by then-Judge Gorsuch, because it found that the defendant’s conduct was not “irrational but for its anticompetitive effect.” The Seventh Circuit reversed, finding the court’s application of the Novell standard inappropriate at the motion to dismiss stage when a plaintiff need only plausibly allege anticompetitive conduct even if the defendant might later try to prove a procompetitive rationale.

The defendant sought Supreme Court review and the Justices asked for the views of the Solicitor General. The Solicitor General did not recommend that the Court hear the appeal. In June, the Court denied the writ of certiorari. After remand, the plaintiff chose to drop its refusal to deal theory of the case and proceed only on a claim of illegal tying. Therefore, the opinion will stand and future monopolist defendants, at least in the Seventh Circuit, will have more difficulty dismissing refusal-to-deal claims. Instead of simply asserting that some rational potential procompetitive purpose or effect is self-evident from the complaint, the defendant will have to show that the allegations do not raise any plausible anticompetitive purpose or effect, a much more difficult burden.

In another refusal to deal case, OJ Commerce LLC v. KidKraft, LP, the defendant won summary judgment on plaintiff’s refusal-to-deal claim. Plaintiff was a discounting online retailer that had sold defendant’s products, including children’s wooden play kitchens, for years. An affiliate of plaintiff then began making wooden play kitchens that plaintiff also sold on its website. Defendant objected, claiming that the affiliates’ kitchens were knock-offs of defendant’s products and that plaintiff’s sales of defendant’s products were plummeting. Eventually, defendant terminated its relationship with plaintiff, who then sued alleging illegal monopolization through a refusal to deal.

The court began with the proposition that even a monopolist is not required to do business with a rival. The court recognized that the Supreme Court had found an exception to that proposition in Aspen Skiing Co. but only if defendant’s termination of prior conduct was irrational but for its anticompetitive effect. The court found “this is hardly the case here” as the defendant had shown several other potential explanations for its termination of plaintiff. As a result, the court granted defendant’s summary judgment motion.

Predatory pricing remains a popular claim by plaintiffs against alleged monopolists, despite the difficult standard for such claims imposed by the Supreme Court. In such claims, the plaintiff alleges that the defendant’s extraordinarily low prices will drive out competitors, which in turn will allow the defendant to later raise prices and harm consumers. In Brooke Group, the Court set a difficult standard to meet because “there is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful.” Also, it can be difficult to distinguish low pro-competitive prices from predatorily low ones. Subsequent plaintiffs have found it difficult to successfully allege, let alone win, such claims.

Last year, we described an exception where a defunct ride-hailing company’s predatory pricing claims against Uber survived a motion to dismiss. In 2021, a taxi company was not as successful and its similar claims were dismissed (although other non-antitrust claims survived). In Desoto Cab Co. v. Uber Technologies, Inc., the court dismissed the claim because the plaintiff did not allege barriers to entry or expansion for new or existing competitors sufficient to allow defendant to recoup its losses. Plaintiff’s mere invocation of network effects without any allegations regarding how they might create entry barriers in this market also was not enough. Finally, unlike the plaintiff in last year’s case, this plaintiff failed to allege why Lyft no longer could prevent defendant’s recoupment through higher prices.

Tying and Agreement

2021 also brought opinions on some of the basic elements of a tying claim and what facts amounted to an agreement.

One element of a successful tying claim is that the defendant is selling two separate products, the tying and the tied product. To make that determination, courts must find that “there is a sufficient demand for the purchase of [the tied product] separate from [the tying product] to identify a distinct product market in which it is efficient to offer [the former] separately from [the latter].” In AngioDynamics, Inc. v. C.R. Bard, Inc., the court denied competing summary judgment motions from the parties on this question. The defendant had sought and received regulatory approval to sell the tied product separately; however, it had actually made only a few such sales and then just to a single customer. The only other competitor that sold both products did sell them separately; however, it was not clear that its conditions were identical to defendant’s. The court, therefore, could not determine as a matter of law that the consumer demand was sufficient to make it efficient for defendant to offer the tied product separately.

For every Sherman Act Section 1 case, a successful plaintiff must show an agreement between defendant and some other entity. To meet that burden at summary judgment or trial, plaintiff must present “evidence that tends to exclude the possibility that the [the defendants] were acting independently.” In a typical distribution case, a terminated distributor claims an anticompetitive agreement between its supplier and some other distributor, usually based on some complaints about the terminated distributor to the supplier from the other distributor.

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Should Venture-Capital Backed Or Foreign-Funded Companies Worry About Predatory-Pricing-Antitrust Claims?

June 10, 2020 | Bona Law PC

Author: Jarod Bona

The US Supreme Court said in 1986 that “[T]here is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful.”

This was the famous Matsushita Elec. Indus. Co. v. Zenith Radio Corp. case that is known mostly for stating that to survive summary judgment on antitrust conspiracy, a plaintiff must present evidence that tends to exclude the possibility of independent (rather than conspiratorial) activity. 475 U.S. 574 (1986). Unfortunately, many federal trial judges have misunderstood this standard to apply to the motion-to-dismiss level.

If you don’t know what predatory pricing is, you should first read Steven Cernak’s outstanding article detailing the doctrine’s history and requirements (and rarity).

The purpose of this article is much more modest—to ask whether the quote above from the 1986 Supreme Court decision is out-of-touch with current scenarios that may or may not be reality (you decide).

As you learned from reading Steve Cernak’s article, a predatory pricing claim is one that asserts that defendants (with monopoly power) harmed competition by pricing below cost to run competitors out of the market in the short run, so they could raise prices later, after the pesky competitors are out of their way (that is called recoupment).

To prevail, besides antitrust injury, a predatory-pricing plaintiff must show that defendant has monopoly power, priced below some appropriate measure of cost, and had the ability to recoup the costs of taking a loss after they vanquished competition and could again raise prices. This is one form of a monopolization claim.

Let’s look at that 1986 Matsushita Supreme Court quote again: “[T]here is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful.”

If you are an antitrust attorney or have studied antitrust, this quote is familiar to you and shows up in the defense briefing of just about every predatory-pricing case. And judges like to cite it too. Indeed, it represents the dismissiveness with which courts and, frankly, the entire antitrust world view predatory-pricing claims. And there is some good reason for that.

But is the statement correct and will it continue to be correct?

Let’s reminisce for a moment to the “olden days.” It used to be, I think, that companies sought to make a profit from the start to the finish. And if they didn’t make a profit, they failed, and whoever ran them would face scandal, scorn, and certain involuntary succession. Each company rise and stood alone, so each would try to be profitable. And if the business wasn’t profitable and didn’t survive, the equity of its shareholders or owners would perish, along with hopes and dreams.

Of course, like most general descriptions of a time or the past, this statement has holes and exceptions and could, in many instances, be plain wrong. But it is the narrative that was told (purposeful passive voice here) and that informed statements like that in the 1986-Matsushita-Supreme-Court decision, which is all that really matters for my point.

So, to price below cost, a company risked bankruptcy because pricing below cost, even for part of the company’s offerings, threatens profits, which threatens survival. And it may take a long time to vanquish competition to be able to later increase prices at monopoly-profit levels. And most companies weren’t willing or able to do that. So “predatory-pricing schemes were rarely tried,” as the quote goes. And, I suppose, those that did try them probably did mostly fail. But I haven’t reviewed the empirical evidence on that.

With that narrative, which is part of the history of predatory-pricing doctrine, we can see why the dismissive quote makes sense.

But what if this is the true world?

But what happens if you have a culture in which financial resources are aggregated into individual entities and you have smart people that place bets on large numbers of companies with the knowledge that most of them are going to fail? The financial entities, however, know and accept that and, instead, make their money from the extremely small percentage of companies that blow up (in a good way) and turn into unicorns or otherwise take over an entire market or industry.

And, at the same time, let’s say that a substantial percentage of these companies that are the subject of these financial bets are the type that succeed only if they reach the scale of monopoly. Maybe these are the sort of companies that create two-sided markets or exchanges, in which network effects are necessary to succeed?

And, what if, to obtain sufficient participants on both sides of the market (and the scale necessary to dominate the market), each of the companies (subject to the bets by the smart-financial entities) priced their products or services at zero or some extremely low amount in a race to get everyone on their website or app or system?

If that were to happen, I wonder if most of these companies would fail—they are pricing below cost, after all—and not everyone is going to be able to pull of a victory in these circumstances. But I bet a handful or more of them would survive and end up dominating their market. And I imagine that some of them would continue pricing below cost between the points of market penetration and complete market domination.

After all, profitability isn’t necessary because the money funding these companies—in this scenario—is not incented by mediocre or even strong profits. What makes these smart financial entities rich are the big winners—the companies with monopoly profits that dominate their markets.

If that were to happen, how would that change the accuracy of the 1986-Matsushita-Supreme Court quote: “[T]here is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful.”

In the scenario I just described—you can decide for yourself whether it sounds familiar or is true—I think that predatory pricing schemes would be commonly tried and periodically successful.

Here is another possible scenario:

Let’s say there is a foreign country that owns or controls a substantial number of companies. It is possible, I suppose, that the bureaucrats in the government are calculating profits and forcing decisions based entirely or mostly on profit-maximization. It is possible that control, power, and influence have nothing to do with their decisions. And that the funding acts just like any other market funding.

But let’s pretend for a second that this isn’t true. Maybe the government money (and control and incentives usually follow the money) is less concerned about profit-maximization and more concerned about other goals. In that case, I wonder if this government money would have the same reluctance to risk profits as companies in the narrative we told earlier. If that is the case, I probably wouldn’t be dismissive of the idea that a predatory-pricing scheme could be tried or successful. Money seeking power or control likes monopoly and may be willing to fund it.

What about this?

This is a little outlandish, but let’s pretend that the people in the government making decisions about bailouts haven’t heard of the term “moral hazard” and are willing to send taxpayer dollars to giant companies whenever the companies have trouble making a profit. For the sake of the story, let’s call them, I don’t know, maybe “too big to fail.”

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