Articles Posted in Monopoly and Dominance

Articles that discuss antitrust and competition issues involving monopolists, dominant companies, monopoly power, and dominance.

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Author: Luis Blanquez

Good news––the answer is yes. The bad news, however, is that antitrust laws only help you in very limited scenarios.

As a general rule, “Businesses are free to choose the parties with whom they deal, as well as the prices, terms, and conditions of that dealing” Pacific Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438, 448 (2009). This means that firms, even those enjoying market power, are not typically required to cooperate with rivals by selling them products that would help them compete. Indeed, antitrust laws do not generally impose limitations on a competitor’s ability to “exercise his own independent discretion as to parties with whom he will deal.” Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 411 (2004).

So, most of the time, once your distribution contract expires, your supplier is free to either renew your contract or stop dealing with you. After all, this is what the free market is about: you are free to decide your own commercial strategy in order to make profits and beat your competitors. But this is not always the case, and the recent case from the Seventh Circuit, Viamedia, Inc. v. Comcast Corp., is a very good example of it.

The willingness to forsake short-term profits

Courts have been cautious to recognize an antitrust exception to the general rule that businesses are free to choose the parties with whom they deal, as well as the prices, terms, and conditions of that dealing. The cases below provide a road map to better understand what you would need to succeed.

Aspen Skiing Co. v. Aspen Highlands Skiing Co., 472 U.S. 585 (1985)

The U.S. Supreme Court has stated in the past that even an actual monopolist has no duty to deal with its competitors. A narrow exception to this rule, however, was established in Aspen Skiing. The Court provided some guidance to explain when a monopolist’s refusal to deal becomes contrary to antitrust rules.

In this case, the defendant monopolized the market for downhill skiing services in Aspen (Colorado). Defendant originally agreed to offer a joint lift ticket with plaintiff because it helped attract skiers. But defendant later decided to discontinue the successful joint-ticket program. By doing so, it rejected, for example, selling lift tickets to the plaintiff at full retail price. Defendant’s justifications included several administrative issues such as splitting revenues, suffering brand image injury, and others.

The Court concluded that defendant’s 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: to push plaintiff out of the market and achieve monopoly power to avoid any sort of competition.

Novell, Inc. v. Microsoft Corp 731 F.3d 1064 (10th Cir. 2013)

Microsoft provided independent software vendors access to a pre-release version of Windows 95––the so called “beta” version of the operating system available to all independent software vendors, including Novell––to facilitate their ability to write software for Windows 95. The reasoning behind this was to develop compatible programs while increasing both the utility of the operating system for users and the sales for Microsoft. Later on, however, Microsoft changed its strategy and revoked such access. It decided to give its proprietary applications the “competitive advantage” of “being the first applications useable on Windows 95.” Novell alleged that Microsoft intentionally altered its existing business practice of providing competitors with Windows technical information in order to monopolize the market for operation systems.

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Author: Luis Blanquez

Luis Blanquez is an antitrust attorney at Bona Law with fifteen years of competition experience in different jurisdictions within the European Union such as Spain, France, Belgium and the UK. 

You can read our article about the elements for monopolization under U.S. antitrust law here. We also wrote about monopolization on the Bona Law website.

Article 102 TFUE

In the European Union, the Directorate General for Competition of the European Commission (“the Commission”) together with the national competition authorities, directly enforces EU competition rules, Articles 101-109 of the Treaty on the Functioning of the European Union (TFEU).

Article 102 TFEU prohibits abusive conduct by companies that have a dominant position in a particular market.

Here is the language:

Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of  consumers; (c) applying  dissimilar  conditions  to  equivalent  transactions  with  other  trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to  commercial usage, have no connection with the subject of such contracts.

First, article 102 TFEU applies to “undertakings,” which is defined by EU case law as including every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed. (C-41/90 Höfner and Elsner v Macrotron [1991] ECR I-1979).

Natural persons, legal persons, and even states are included in the interpretation of undertakings. (So, as in the United States, governments in Europe might violate the competition laws).

Second, to qualify as an undertaking, the entity must be also engaged in an economic activity, i.e. offering goods and/or services within a relevant market.

Third, to fit within Article 102 TFUE’s prohibition, the conduct must have a minimum level of cross-border effect between member states within the EU.

The concept of dominance under EU antitrust rules

As explained above, article 102 TFEU prohibits abusive conduct by companies that have a dominant position in a particular market.

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MonopolyYou may have noticed Peter Thiel’s provocatively titled article “Competition is for Losers” in the Review section of last weekend’s Wall Street Journal. Since we extol the virtues of competition here at The Antitrust Attorney Blog, perhaps you are bracing yourself for me to rip into his article?

No way! It is a great article. And his discussion is not only a good antitrust primer—without the jargon—but is also absolutely accurate. Thom Lambert at the excellent blog, Truth on the Market, seems to agree.

Of course, you have to read beyond the headline, which is, like most headlines, meant to grab your attention. Peter Thiel in his book “Zero to One,” makes a lot of great points, from both the macro and micro level. I’ll focus on the micro level here.https://ir-na.amazon-adsystem.com/e/ir?t=antitrustattorney-20&language=en_US&l=li2&o=1&a=0804139296

Thiel contrasts perfect competition with monopoly. In the typical perfect-competition scenario, many firms will sell the exact same product, like a commodity. The market, at least theoretically, will achieve equilibrium, and there is no market power. The market sets the price. The profits for the sellers are minimal—zero if you are talking about economic profit (which assumes a modest rate of return).

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In a typical monopoly market, by contrast, the seller is the primary or only firm that offers the product and can determine its own price and quantity produced (of course, even a monopolist can often reach the edge of its own relevant market by setting a price too high). A monopolist usually has a high-profit margin and very healthy profits.

Of course, perfect competition and monopoly are endpoints on a continuum, with lots of room between.

There is a lot to say about the article, but I am going to limit myself to the micro level—the perspective of the individual business not the overall economy.

Thiel develops the unremarkable proposition that it is much better to go into business as a fancy monopolist than a perfect-competition soldier. Thiel says “If you want to create and capture lasting value, don’t build an undifferentiated commodity business.” That’s right.

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