US Supreme Court

November 15, 2021

Classic Antitrust Cases: Leegin and Resale-Price Maintenance Agreements

Some antitrust questions are easy: Is naked price-fixing among competitors a Sherman Act violation? Yes, of course it is. Indeed, it is a per se antitrust violation.

But there is one issue that is not only a common occurrence but also a source of great controversy among antitrust attorneys and commentators: Is price-fixing between manufacturers and distributors (or retailers) an antitrust violation? This is usually called a resale-price-maintenance agreement and it really isn’t clear if it violates the antitrust laws.

For many years, resale-price maintenance—called RPM by those in the know—was on the list of the most forbidden of antitrust conduct, a per se antitrust violation. It was up there with horizontal price fixing, market allocation, bid rigging, and certain group boycotts and tying arrangements.

There was a way around a violation, known as the Colgate exception, whereby a supplier would unilaterally develop a policy that its product must be sold at a certain price or it would terminate dealers. This well-known exception was based on the idea that, in most situations, companies had no obligation to deal with any particular company and could refuse to deal with distributors if they wanted. Of course, if the supplier entered a contract with the distributor to sell the supplier’s products at certain prices, that was an entirely different story. The antitrust law brought in the cavalry in those cases.

You can read our article about the Colgate exception here: The Colgate Doctrine and Other Alternatives to Resale-Price-Maintenance Agreements.

In 2007, the Supreme Court dramatically changed the landscape when it decided Leegin Creative Leather Products, Inc. v. PSKS, Inc. (Kay’s Closet). The question presented to the Supreme Court in Leegin was whether to overrule an almost 100-year old precedent (Dr. Miles Medical Co.) that established the rule that resale-price maintenance was per se illegal under the Sherman Act.

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October 24, 2021

Classic Antitrust Cases: National Society of Professional Engineers v. United States, 435 U.S. 679 (1978)

by Bona Law PC

Author: Jarod Bona

As an antitrust attorney, over time you see the same major cases cited again and again. It is only natural that you develop favorites. Here at The Antitrust Attorney Blog, we, from time-to-time, highlight some of the “Classic Antitrust Cases” that we love, that we hate, or that we merely find interesting.

The Supreme Court decided National Society of Professional Engineers in the late 1970s—when I was two-years old—and before the Reagan Revolution. But the views that the author, Justice John Paul Stevens, expressed on behalf of the Supreme Court perhaps ushered in the faith in competition often associated with the 1980s.

The National Society of Professional Engineers thought that its members were above price competition. Indeed, it strictly forbid them from competing on price.

The reason was simple: “it would be cheaper and easier for an engineer ‘to design and specify inefficient and unnecessarily expensive structures and methods of construction.’ Accordingly, competitive pressure to offer engineering services at the lowest possible price would adversely affect the quality of engineering. Moreover, the practice of awarding engineering contracts to the lowest bidder, regardless of quality, would be dangerous to the public health, safety, and welfare.” (684-85).

So price competition will cause bridges to collapse? I suppose the same argument could be made for any market where greater expense can improve the health or safety of a product or service. We better not let the car manufacturers compete to provide us with cars because they will skimp on the brakes. It is often the professionals–including and especially lawyers–that find competition distasteful or damaging for their particular profession and believe that they are above it. Well, according to the US Supreme Court, they are not.

Indeed, quite recently, in NCAA v. Alston (analyzed here by Steve Cernak), the US Supreme Court reaffirmed and applied National Society of Professional Engineers when it told the NCAA that if they don’t like competition, they better go to Congress because, as of now, the Sherman Act applies to them and that law is predicated on one assumption alone: “competition is the best method of allocating resources” in the Nation’s economy.

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June 23, 2021

Alston v. NCAA: Helpful for Future Antitrust Defendants?

by Bona Law PC

Author: Steven J. Cernak[1]

On June 21, 2021, the U.S. Supreme Court affirmed lower court decisions and held that certain NCAA restrictions on educational benefits for student-athletes violated Sherman Act Section 1. The unanimous opinion was a clear win for the plaintiff class and almost certainly will lead to big changes in college sports.

It was also a clear defeat for the NCAA. While the opinion (as the NCAA’s reaction emphasized) maintained the NCAA’s ability to prohibit non-educational benefits and define limits on educational ones, any such NCAA rules must be defended under a full antitrust rule of reason analysis, not a special deferential standard based on language from a 1984 Supreme Court case. Litigation on such issues is already in the lower courts and more can now be expected.

Justice Gorsuch’s unanimous opinion for the Court, however, contains numerous references, concepts, and phrases that will prove helpful to future antitrust defendants, especially those in joint ventures with competitors. The opinion is a reminder that any effort to aggressively change antitrust’s status quo will need to deal with a judiciary steeped in decades’ worth of precedent. Below are some highlights of the opinion sure to be noted by future antitrust defendants.

American Express, Trinko Alive and Well

The recent House Majority Report on antitrust issues in Big Tech, co-authored by recently confirmed FTC Commissioner Lina Khan, had several general recommendations. One of those recommendations was for Congress to overturn several Court antitrust opinions, including Ohio v. American Express (written by Justice Thomas) and Verizon v. Trinko (written by Justice Scalia). We covered the ramifications of such reversals here and here.

Apparently, the Court disagrees with that recommendation. American Express was cited at least seven times by the Court, both for when the rule of reason analysis should be used and the three-part burden-shifting process of such an analysis. In a heavily criticized part of the American Express opinion, the Court found that the rule of reason analysis needed to account for effects on both sides of a two-sided market. While Justice Gorsuch’s opinion here did not cite American Express for that proposition, it and the parties assumed that the NCAA could try to justify its restraints in the labor or input market with positive effects in the output market, further cementing the American Express analysis.

The opinion cites Trinko at least four times, usually for the proposition that judges should not impose remedies that attempt to “micromanage” a company’s business by setting prices and similar details. Another citation, however, is to Trinko’s admonition to courts to avoid “mistaken condemnations of legitimate business arrangements” that could chill the procompetitive conduct the antitrust laws are designed to protect. This focus on “error costs” has been embedded in antitrust jurisprudence for decades but has come under attack in recent years from commentators who would prefer more aggressive antitrust enforcement. This unanimous opinion ignores that criticism.

Bork and Easterbrook

Many of today’s antitrust principles can be attributed to Chicago School theorists, including Robert Bork and Frank Easterbrook. Their writings, both as academics and appellate court judges, have remained influential, although both recently have come under withering attack. Justice Gorsuch seems to remain a fan of both.

Bork’s opinion in Rothery Storage v. Atlas Van Lines is cited twice, once for the proposition that the reasonableness of some actions can be judged quickly and once that courts should not require businesses to use the least restrictive means for achieving legitimate purposes. Bork’s recently re-released The Antitrust Paradox is also quoted for the proposition that competitors in sports leagues must be allowed to reach some agreements, such as on number of players, in order to have any competitions at all.

The Supreme Court cites two of Easterbrook’s Seventh Circuit opinions. The Court cites Polk Bros. v. Forest City Enterprises for the proposition that a joint venture among firms without the ability to reduce output is unlikely to harm consumers. A page later, the Court uses Chicago Professional Sports v. NBA to explain that different restraints among joint venturers might require different depths of analysis to ascertain their effect on competition. Finally, the Court cites one of his law review articles to support judicial caution in summarily condemning business conduct until courts and economists have accumulated sufficient understanding of its likely competitive effect. Surprisingly, Easterbrook’s most famous article — The Limits of Antitrust — was not used in the discussion of the error-cost framework discussed above, despite continuing to be celebrated as one of the leading descriptions of the concept.

Other Quotable Quotes

In addition to the citations above, several other portions of the opinion are sure to be used by future antitrust defendants. In fact, on June 21 Prof. Randy Picker (@randypicker) put together a Letterman-like Top 10 List of Things that Defense Attorneys will Like in Alston tweet thread. No arguments here with any item on Prof. Picker’s list but two groups of such quotes are worth highlighting.

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June 15, 2021

The Federal Trade Commission and its Ability to Seek Restitution or Disgorgement Remedies

by Bona Law PC

Author: Jarod Bona

The US Supreme Court in AMG Capital Management, LLC v. Federal Trade Commission ends, at least for now, the FTC’s habit of seeking monetary damages in court as part of requests for equitable relief.

The decision wasn’t controversial at the Supreme Court, as it was unanimous, with former Harvard Law antitrust and administrative law guru Justice Stephen Breyer writing the opinion. But this decision stings the FTC because it shuts down their decades-long practice and does so by simply parsing the wording of the relevant statutes.

Why did it take so long to understand what the statutes said?

Background about FTC Enforcement

The Federal Trade Commission is one of those alphabet (FTC) agencies that the textbooks consider independent and full of experts. Like the Antitrust Division of the Department of Justice, which is not independent, they are executive-branch federal-antitrust-law enforcers. Their authority also includes consumer-protection concerns.

The FTC doesn’t enforce the criminal antitrust laws like the Justice Department, but when they want to pursue an action, they have options. They can sue in federal court, but—like other independent federal agencies—alternatively, they can also start the action in their own administrative agency, utilizing an administrative law judge to do the fact-finding (this can sometimes make all the difference if you incorporate deferential standards of review). This is Section 5 of the FTC Act.

But what matters here is what happens if the FTC goes directly to federal court, which they can do under Section 13(b) of the FTC Act. This Section allows the FTC to obtain from a federal court “a temporary restraining order or a preliminary injunction.” But, over the years, the FTC has also regularly convinced courts to order restitution and other monetary relief.

AMG Capital Management, LLC v. Federal Trade Commission

The issue in AMG Capital Management was “Did Congress, by enacting §13(b)’s words, ‘permanent injunction,’ grant the Commission authority to obtain monetary relief directly from courts, thereby effectively bypassing the process set forth in §5 and §19?”

The answer is no.

This is now the part where most articles would summarize the Court’s reasoning, outlining various statutory clauses, their history, and how the Court decided to interpret them. But I am going to skip that. If you are litigating an active case involving similar language or a possess a great love for administrative-agency statutory language, you will read the actual decision anyway and Justice Breyer is rather articulate. For the rest of you, there is no reason for me to show off.

I will, however, make one point about the Court’s reasoning: They address and reject the argument by amici about the policy-related importance of allowing the Commission to use §13(b) to obtain monetary relief.

And, in fact, after this decision, we heard a lot of worry about the FTC “losing” this power they never had, at least according to the highest Court in our land.

But I am happy to see the unanimous Court reject this argument. Sometimes when we are in the trees (not the forest) doing utility calculations in our highly regulated world, we forget that we have a federal government of limited powers. That means there must exist an actual concrete basis for any appendage of our government—backed by the most powerful military in the history of the world—to act against private citizens and businesses. We must never forget that. It doesn’t matter whether so-called experts think that it is “good” for certain governmental enforcers to have any particular power. If there isn’t a statutory or constitutional basis for the power, it doesn’t exist.

What Now?

The real issue is what happens now. Members of Congress, already excited about antitrust, have promised to restore this power and President Biden would certain sign such a bill.

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June 13, 2021

Who is Capable of Conspiring to Violate the Antitrust Laws?

by Bona Law PC

Author: Jarod Bona

When you think about Sherman Act Section 1 antitrust cases (the ones involving conspiracies), you usually consider the question—often framed at the motion to dismiss stage as a Twombly inquiry—whether the defendants actually engaged in an antitrust conspiracy.

But, sometimes, the question is whether the defendants are, in fact, capable of conspiring together.

That isn’t a commentary on the intelligence or skills of any particular defendants, but a serious antitrust issue that can—in some instances—create complexity.

So far I’ve been somewhat opaque, so let me illustrate. Let’s say you want to sue a corporation under the antitrust laws, but can’t find another entity they’ve conspired with so you can invoke Section 1 of the Sherman Act (which requires a conspiracy or agreement). How about this: You allege that the corporation conspired with its President, Vice-President, and Treasurer to violate the antitrust laws. Can you do that?

Probably not. In the typical case, a corporation is not legally capable of conspiring with its own officers. The group is considered, for purposes of the antitrust laws, as a “single economic entity,” which is incapable of conspiring with itself. Of course, the situation is complicated if we aren’t talking about the typical corporate officers, but instead analyzing a case with a corporation and corporate agents (or in some cases, even employees) that are acting for their own self-interest and not as a true agent of the corporation. The question, often a complex one, will usually come down to whether there is sufficient separation of economic interests that the law can justify treating them as separate actors.

A lot of tricky issues can arise when dealing with companies and their subsidiaries as well. In the classic case, Copperweld Corp. v. Independence Tube Corporation, for example, the United States Supreme Court held that the coordinated activities of a parent and its wholly-owned subsidiary are a single enterprise (incapable of conspiring) for purposes of Section 1 of the Sherman Act.

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March 27, 2021

Why You Should Consider Filing an Amicus Brief in an Appellate Case

by Bona Law PC

Author: Jarod Bona

An amicus curiae brief is filed by a non-party—usually in an appellate court like the US Supreme Court—that seeks to educate the court by offering facts, analysis, or at least a perspective that the party briefing doesn’t present. The term amicus curiae means “friend of the court,” and that is exactly what the parties that file these briefs are. They aren’t objective, but they are—without pay—helping out the court, like a friend might. Well, sort of.

Entities filing amicus briefs do so for a reason and that reason isn’t typically just court friendliness. In fact, as we will discuss below, there are many good reasons for someone to file an amicus brief.

Along with antitrust and commercial litigation, I’ve been an appellate litigator my entire career. I started out by clerking for Judge James B. Loken on the United States Court of Appeals for the Eighth Circuit (in Minneapolis), then moved on to Gibson Dunn’s appellate group in Washington DC. So, as you might imagine, I’ve participated in many appellate matters. And without question some of my favorite briefs to write are amicus briefs. I’ve filed many of them over the years.

Indeed, at Bona Law, we have filed several amicus briefs on various topics (US Supreme Court (and here), Fourth Circuit, Eighth Circuit, Ninth Circuit, Tenth Circuit and a couple with the Minnesota Supreme Court, which you can read about here and here and here).

From the attorney’s perspective what I really like about amicus briefs is that they invite opportunities for creativity. The briefs for the parties before the court include necessary but less exciting information like procedural history, standard of review, etc. Then, of course, they must address certain necessary arguments. Even still, there is room for creativity and a good appellate lawyer will take a thoughtful approach to a case in a way that the trial lawyer that knows the case too well may not.

But what is great about writing an amicus brief is that you can pick a particular angle and focus on it, while the parties slog through other necessary details. The attorney writing the amicus brief figures out—with the client’s help—the best contribution they can make and just does it, as efficiently and effectively as possible.

Because the amicus brief should not repeat the arguments from the parties, the attorney writing the brief must develop a different approach or delve deeper into an argument that won’t get the attention it deserves from the parties. This is great fun as the attorney can introduce a new perspective to the case, limited not by the arguments below, but by the broader standard of what will help the court.

This means that the law review article that the attorney saw on the subject that hasn’t developed into case law is fair game. So is the empirical study from a group of economists that may reflect on practical implications of the decision confronting the court. Or the attorney might educate a state supreme court about what other states are doing on the issue. Often an industry association will explain to the court how the issue affects their members.

The point is that amicus briefs present opportunities to develop issues in ways that party briefs rarely do. Indeed, that is partly why they are valuable to courts.

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February 11, 2021

Waiting for Change—Antitrust in Distribution in Early 2021

by Bona Law PC

Author: Steven J. Cernak

Recently, I was researching antitrust developments in 2020 to update my Antitrust in Distribution and Franchising book. While there were several developments last year, what struck me was the large number of potentially drastic changes to antitrust distribution law that started to play out in 2020 but are continuing into 2021. Whether you think of them as shoes to drop or dogs yet to bark, these three potential changes are the key ones to watch in 2021.

Legislative Changes to the Antitrust Laws?

In the Fall of 2020, the U.S. House Judiciary Committee issued its Majority Report on its lengthy Investigation into Digital Markets. While the bulk of the Report focused on a few big tech companies like Google, Facebook, and Amazon, the Report also recommended that Congress override several “classic antitrust cases” that allegedly misinterpreted antitrust law applicable to all companies. Because we have covered several of those recommendations in detail already (see below), I will just focus on potential applications to distribution here.

First, the Report recommended overriding Trinko, a case that has made refusal to deal claims against monopolists very difficult to bring, as we detail in the next section. In Trinko, the Court practically limited such claims to those that are nearly identical to the claims in Aspen Skiing, namely that the monopolist ended a prior voluntary course of dealing with the plaintiff for no good reason. Might an override of Trinko make it easier for a plaintiff-retailer to object if a monopolist defendant-retailer kicks the plaintiff off the defendant’s platform?

Second, overriding Trinko might also alter one of its more famous holdings, that the mere possession of monopoly power and the ability to impose “high” prices does not violate Sherman Act Section 2. While most states have price gouging laws, Trinko found that charging a “high” price was not “monopolization.” If Congress overrides Trinko—and adopts the broader “abuse of dominance” standard for Section 2 cases, as the Report also recommends — might we end up with a federal price gouging law?

Third, the Report also is concerned about monopolists charging too low a price and recommends overriding Brooke Group and its “recoupment” requirement for successful predatory pricing claims. As we covered previously, the Supreme Court was worried about discouraging low prices for consumers by companies with large market shares and so adopted a two-part test in Brooke Group that is difficult for plaintiffs to meet. Plaintiffs must show very low prices, usually below average variable costs, plus the probability that the defendant later will be able to raise prices to recoup its losses. If Congress overrides the recoupment prong of Brooke Group, might we see less aggressive pricing from companies with high market shares?

Fourth, overriding the recoupment prong also might revive long-dormant primary line price discrimination claims under Robinson-Patman. While there are few Robinson-Patman claims in total today, all of them are secondary line claims: Manufacturer 1 sells the same commodity to Retailer A at a lower price than to Retailer B, who claims an injury to itself and competition. In Brooke Group, the Court looked at primary line discrimination claims and applied the same two-part test for predatory pricing to primary line claims: Manufacturer 1’s lower prices to Retailer A must be below its average variable costs and Manufacturer 1 must be able to later recoup its losses before a court can find harm to competition and Manufacturer 2. Before Brooke Group, the Supreme Court’s test had been the one from the oft-criticized Utah Pie opinion that focused on the defendant’s intent to lower prices for the entire market. If Congress overrides the recoupment prong of Brooke Group, might we see price discrimination claims from manufacturers who cannot, or do not want to, match the lower prices of their competitors?

As of this writing, Sen. Amy Klobuchar has introduced legislation that would drastically change the antitrust laws. While most of the proposed changes relate to merger review, the proposed legislation would expand the definition of “exclusionary conduct” subject to the antitrust laws and create a presumption that such conduct by “dominant firms” is anticompetitive. Might we see changes to the antitrust laws that drastically change how manufacturers, distributors, and retailers deal with one another?

Supreme Court Weighs in on Refusal to Deal Law?

As we have discussed several times (see here, here, and here), the courts are skeptical of claims that a monopolist’s refusal to deal with some other company, usually a competitor, is monopolization. Generally, even a monopolist has no duty to deal with its competitors. One of the few exceptions is when the facts are very close to Aspen Skiing where the Court did find such a violation of a duty to deal.

In Aspen Skiing, the Court found a refusal to deal violation because of what it saw as the defendant’s decision to terminate a “voluntary (and thus presumably profitable) course of dealing” and its “willingness to forego short-term profits to achieve an anti-competitive end.” Many refusal to deal claims flounder because the defendant and plaintiff had never entered any sort of “course of dealing.” But even if that prong is met, many lower court judges, such as then-Judge Gorsuch in the 10^th Circuit’s Novell case, emphasize that a monopolist might “forego short-term profits” but for pro-competitive ends. Those cases, therefore, require a plaintiff to show that defendant’s conduct is “irrational but for its anticompetitive effect.”

The District Court in Viamedia, Inc. v. Comcast Corp. granted defendant’s motion to dismiss the refusal to deal claim, despite termination of a prior voluntary course of dealing, because the “potentially improved efficiency” resulting from the termination showed that the move was not “irrational but for its anticompetitive effect.”

The Seventh Circuit reversed, finding that a plaintiff only must allege that defendant’s termination was “predatory.” As the concurring judge described it, a plaintiff need only allege some anticompetitive goal for the termination. A defendant’s assertion of other, procompetitive, rationales for the conduct was a question for summary judgment, not a motion to dismiss. If allowed to stand, the court’s ruling would make it much easier for refusal to deal plaintiffs to survive to discovery, thereby encouraging more such claims.

Comcast petitioned the Supreme Court for certiorari and in December 2020, the Court sought the views of the Solicitor General. Any response from the Solicitor General could indicate whether the Biden Administration supports any change, large or small, as to how the Court has interpreted the Sherman Act in refusal to deal cases. Might the Court weigh in on refusal to deal monopolization cases and, if so, how would such an opinion affect the chances of new antitrust legislation?

Changes Driven by Amazon?

Of course, we could not post about distribution and antitrust and not mention Amazon. As we discussed earlier, Amazon’s Jeff Bezos was one of several big tech executives who testified at a Fall 2020 Congressional hearing. At the time, we described some potential antitrust claims raised by that testimony and concluded that ones alleging illegal tying or monopolization had the best chance of succeeding—and that even those faced some real questions.

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February 4, 2021

What Happens if Congress Overrides the Classic Antitrust Platform Market Case of American Express?

by Bona Law PC

Authors: Kristen Harris and Steven J. Cernak

As we covered earlier (see here and here), the recent U.S. House Judiciary Committee Majority Report on its Investigation into Digital Markets recommends that Congress override several classic antitrust cases. In particular, the Report recommends “clarifying that cases involving platforms do not require plaintiffs to establish harm to both sets of customers” by overriding Ohio v. American Express. While American Express is of more recent vintage than some of the other Report’s targets, overriding it would change drastically how courts view “platform markets” and, perhaps, competition generally.

Overview of platform markets

To begin, it is helpful to understand what a platform market is. A platform market—sometimes referred to as a two-sided market—is a market where a company’s product or service caters to two or more customer groups and intermediates between its customer groups to create value. Some well-known examples include telephones, Uber, shopping malls, and credit cards.

A key characteristic of platform markets is the existence of indirect network effects. In traditional markets, that is, non-platform markets, the value of the last unit consumed decreases. But in platform markets with indirect network effects, the value of the platform increases as more people consume it. For example, the value of a phone depends on how many other people have phones; if no one else had a phone the value to you would be close to zero. To connect an example to the American Express case, the value of a credit card to the cardholder increases when more merchants accept the card; if no merchant accepted your credit card, its value to you would likely be zero.

Platform markets also carry specific antitrust implications particularly when it comes to the plaintiff’s burden to define the relevant market. Due to the indirect network effects, a price increase (or net harm) to one customer group may correspond to a bigger price decrease (or net benefit) to the other customer group. Depending on whether both customer groups are considered in defining the relevant market, the defendant may or may not be found to have violated the antitrust laws.

Traditionally, plaintiffs have the burden of showing the challenged conduct causes harm to competition in a defined relevant market. If the plaintiff satisfies its prima facie burden, the burden shifts to the defendant to challenge the plaintiff’s market definition or to show efficiency justifications. As the reader may have guessed, this is where the Supreme Court’s American Express decision comes in.

American Express case

Initially, several states sued American Express and two other credit card companies alleging violations of Section 1 of the Sherman Act. American Express was the only defendant that did not settle. The states’ complaint alleged that a “non-discrimination provision” (NDP) in contracts between American Express and its participating merchants unreasonably restricted competition in violation of Section 1. The NDP prohibits merchants from directly or indirectly steering customers to use a particular card, such as Visa or MasterCard, when making a purchase.

The trial court found that platform markets comprise “at least two separate, yet deeply interrelated, markets” and concluded that the relevant market was the “network services market” on the merchant side of the platform and excluded the cardholders. The court found that American Express violated Section 1 because NDPs caused anticompetitive effects on interbrand competition and American Express’ procompetitive justifications did not outweigh the harm to competition.

American Express appealed the district court’s decision arguing that the court got the market definition analysis incorrect. The Second Circuit agreed with American Express, reversed the decision, and held that the court erred in defining the relevant market. Specifically, the court held that the plaintiffs failed to show that NDPs made “all American Express consumers on both sides of the platform . . . worse off overall” and thus failed to satisfy the plaintiff’s prima facie burden to show harm in a properly defined market.

Then, the plaintiffs petitioned the Supreme Court to reverse the Second Circuit.

The key issues before the Supreme Court were whether the relevant market in multi-sided markets should include all sides of the market and if so, whether plaintiffs are required to show net harm in the whole market as part of their prima facie case.

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January 31, 2021

Antitrust Injury and the Classic Antitrust Case of Brunswick Corp v. Pueblo Bowl-O-Mat

by Bona Law PC

photo credit: ginnerobot via photopin cc

Author: Jarod Bona

Antitrust injury is one of the most commonly fought battles in antitrust litigation. It is also one of the least understood antitrust concepts.

No matter what your antitrust theory, it is almost certain that you must satisfy antitrust-injury requirements to win your case. So you ought to have some idea of what it is.

The often-quoted language is that antitrust injury is “injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendant’s acts unlawful.” You will see this language—or some variation of it—in most court opinions deciding antitrust-injury issues. The language and the analysis are from the Classic Antitrust Case entitled Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., decided by the US Supreme Court in 1977.

For more, you can read our article on the Bona Law website describing antitrust injury.

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.

If your antitrust attorney is drafting a brief on your behalf and antitrust injury is in dispute—which is quite likely—he or she will probably cite Brunswick Corp.

Since antitrust injury is synonymous with Brunswick Corp., let’s talk about the actual case for a moment. If you are passionate about bowling-alley markets, you’ll love this case.

If you were around in the 1950s, you probably know that bowling was a big deal. The industry expanded rapidly, which was great for manufacturers of bowling equipment. But sometimes good things come to an end and the bowling industry went into a sharp decline in the early 1960s. These same manufacturers began to have trouble, as bowling alleys starting paying late or not at all for their leased equipment.

A particular bowling-equipment manufacturer—Brunswick Corp—began acquiring and operating defaulted bowling centers when they couldn’t resell the leased equipment. For a period of seven years, Brunswick acquired 222 centers, some that it either disposed of or closed. This buying binge turned it into the largest operator of bowling centers, by far. If you are a fan of The Big Lebowski, you might notice that the Dude spends substantial time at a Brunswick bowling alley.

Brunswick’s buying binge was a problem for a competing bowling-alley operator and competitor, Pueblo Bowl-O-Mat, who sued under the Clayton Act, arguing that certain Brunswick acquisitions in their territory “might substantially lessen competition or tend to create a monopoly.” Without the acquisition, the purchased bowling alleys would have gone out of business, which would have benefited Pueblo, a competitor.

The case eventually made its way to the US Supreme Court, which rejected the Clayton Act claim for lack of antitrust injury. The reason is that even though Pueblo was, indeed, harmed by the acquisition, it wasn’t a harm that the antitrust laws were meant to protect. The acquisition actually increased competition. Absent the acquisition, Pueblo would have gained market share. But with the acquisition, the market included both Pueblo and the bowling alleys that would have left the market—i.e. more competition.

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October 13, 2020

Classic Antitrust Cases: Trinko, linkLine and the House Report on Big Tech

by Bona Law PC

Author: Steven J. Cernak

On October 6, 2020, the Antitrust Subcommittee of the U.S. House Judiciary Committee issued its long-anticipated Majority Report of its Investigation of Competition in Digital Markets. As expected, the Report detailed its findings from its investigation of Google, Apple, Facebook, and Amazon along with recommendations for actions for Congress to consider regarding those firms.

In addition, the Report included recommendations for some general legislative changes to the antitrust laws. Included in those recommendations were proposals for Congress to overrule several classic antitrust opinions. Because this blog has summarized several classic antitrust cases over the years (see here and here, for example), we thought we would summarize some of the opinions that now might be on the chopping block. This post concerns two classic Supreme Court opinions on refusal to deal or essential facility monopolization claims, Trinko and linkLine.

House Report on Refusal to Deal and Essential Facilities

The Report’s recommendations for general changes in the antitrust laws included several aimed at increasing enforcement of Sherman Act Section 2’s prohibition of monopolization. In particular, the Report recommended that:

Congress consider revitalizing the “essential facilities” doctrine, or the legal requirement that dominant firms provide access to their infrastructural services or facilities on a nondiscriminatory basis. To clarify the law, Congress should consider overriding judicial decisions that have treated unfavorably essential facilities- and refusal to deal-based theories of harm. (Report, pp. 396-7)

The two judicial opinions listed were Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) and Pacific Bell Telephone Co. v. linkLine Communications, Inc., 555 U.S. 438 (2009).

Trinko

Justice Scalia wrote the Court’s opinion dismissing the plaintiff’s refusal to deal claim. There were no dissents although Justice Stevens, joined by Justices Souter and Thomas, wrote separately to concur in the result but would have dismissed based on lack of standing.

Since the Supreme Court’s 1919 U.S. v. Colgate (250 U.S. 300) decision, courts have found that “in the absence of any purpose to create or maintain a monopoly,” the antitrust laws allow any actor, including a monopolist, “freely to exercise his own independent discretion as to parties with whom he will deal.” Trinko narrowly interpreted the Court’s earlier exceptions to the rule that even a monopolist can choose its own trading partners.

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