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Exclusionary Conduct:
Structuring an Approach to Monopolization Cases
Tim Brennan
2006: T.D. MacDonald Chair in Industrial Economics
Competition Bureau, Industry Canada
Permanent: Professor, Public Policy and Economics
University of Maryland, Baltimore County
Senior Fellow, Resources for the Future, Washington, DC
brennan.tim@cb-bc.gc.ca, brennan@umbc.edu
Office of Fair Trading
London, England
19 June 2006
By way of introduction
• Personal background
– Most experience US rather than Canada, references often to US law
– 8 yrs full-time with US Antitrust Division; ―on call‖ for about 13 more
– Staff consultant to FTC, 2003-2005
• Disclaimer: views not necessarily those of Competition Bureau
• Views on how law should work, not necessarily how it does work
– Both US and CA; not as familiar with EU
– But these ideas do show up in the strongest, clearest cases
• Special features of US law
– Common law vs. (relatively) detailed statute
– Many cases; long history of jurisprudence
– Extensive rights of private action (not necessarily helpful)
– Integrated legal staff vs. separate investigative units
Brennan: Exclusionary Conduct 8/29/2010 2
Important UK contributions on abuse, exclusion
• From legal formalism to economic effect
• Classification of three categories of antitrust
– Collusion, mergers, abuse of dominance
– Recognizing problems with Article 82
• Not just ―market distortion‖, but ―consumer welfare‖ focus
• Problems implementing cost-based tests
• Difficulties of establishing dominance
– Market share not enough
– Questioning ―collective dominance‖
• Distinguishing abuse categories (crucial here)
– ―Predation-type‖ vs. ―RRC abuses‖
– Impropriety of profit sacrifice for the latter
Brennan: Exclusionary Conduct 8/29/2010 3
Still, issues on the table
• Is there more than distinguishing between ―exclusionary‖ and
pro-competitive‖ behavior?
• ―Rivals‖ focus, distinguishing only between revenues and costs?
• Role of prior market power, dominance?
• Quest for a uniform standard, ―consistency of approach‖?
• Do we want an equally efficient competitor test in all cases?
• Role of intent, willfulness?
• Are rebates, bundles bad because they are predatory?
• What cost-based tests should be used for bundles?
• Should there always ―be a gap between the thresholds … relating
to abuse of dominance and to mergers‖? [Vickers, 2003]
Brennan: Exclusionary Conduct 8/29/2010 4
With that, what to take away
• Why monopolization, abuse controversial, difficult: Rival focus
• Recognize exclusion fundamentally different from predation
• Ask, ―Are initial effects bad (exclusion) or good (predation)?‖
• Predation should be hard, but exclusion more like mergers
• Exclusion, barriers to entry, RRC entail acquiring control over a
complement market to raise effective price
• Apply empirical merger techniques to complement markets
• Reject predation-based profit sacrifice, equally efficient
competitor, prior dominance screens
• Case examples
• Applications to bundling, e.g., Canada Pipe
• New options for remedies
• Focus on creating new monopoly, not maintaining old ones
Brennan: Exclusionary Conduct 8/29/2010 5
Two competition areas relatively uncontroversial
• Horizontal collusion; US Sherman §1, CA S.45-49, UK CA Ch. I
– Fact-based, like criminal investigations
– Rule of reason vs. per se boundary
– Entry as mitigating factor; need for policy (libertarian critique)
• Horizontal mergers; US Clayton §7, CA S.91-103, UK EA02
– Market delineation empirical core of cases
– Entry as mitigating factor, even with large share
– Critical loss/elasticities debate
– Use of differentiated product empirical models, simulations
– Necessity of market definition under unilateral effects
– Efficiency defenses, consumer vs. total vs. weighted welfare
• However, little dispute on theory, conceptual foundations
Brennan: Exclusionary Conduct 8/29/2010 6
Troublesome #3: Monopolization in its many forms
• Sherman §2 in U.S. law, S. 75, 77-79 Canada Competition Act
– Foreclosure
– Abuse of dominance
– Exclusive dealing
– Tying/bundling
– ―Raising rivals’ costs‖
– Predatory pricing
• Chapter II of 1998 Competition Act, Article 82 in EU
– Imposing ―unfair‖ prices or ―trading conditions‖
– ―Limiting production, markets or technical development‖
– ―Applying dissimilar conditions to equivalent transactions‖
– Conditioning contracts on obligations ―with no connection‖
Brennan: Exclusionary Conduct 8/29/2010 7
Persistently controversial
• Market power presumably horizontal, not vertical
• Practices reduce demand for monopolist’s product
• Too much competition: Low prices, more products
• Does monopolization law protect competitors, not competition?
• Recent observation on US, EU:
– This branch [of antitrust] has been confused since its inception, and
has become a vehicle of suppressing, not promoting, competition in
the marketplace—an unfortunate fact of U.S. antitrust law and even
more so of European competition law.
– Ronald Cass, former US ITC vice chair
• Comment during FTC presentation: ―Why would you want to save
Section 2?‖
Brennan: Exclusionary Conduct 8/29/2010 8
Questions
• Why is monopolization different from collusion, merger?
• Is monopolization about economic welfare or something else
(competitor protection, intent)?
• Is there any way to harmonize monopolization law with principles
underlying collusion, merger law?
• What are the practical implications of the lack of harmony?
• Do predation ―screens‖ make sense for exclusion case?
• Would other screens better sort good conduct from bad?
• What can vertical aspects usefully contribute to exclusionary
conduct analysis?
• Is there a simple way to change monopolization doctrine to
reconcile it with its antitrust cousins?
• Can we make exclusionary conduct cases simpler, easier,
clearer?
Brennan: Exclusionary Conduct 8/29/2010 9
Why?: The fallacious Section 2 ―rivalry‖ syllogism
• Premise 1: Section 2 cases about hurting rivals
– Dominant firm abusing the little guys still animating vision
• Premise 2: Because competition hurts rivals, the burden in cases
based on rival injury should be very high (insurmountable)
• Conclusion: Section 2 cases should bear a very high
(insurmountable) burden
• Debate so far about Premise 2, not Premise 1
• ―Chicago school‖ sceptics accepts both premises, conclusion
• Post-Chicago/populist activist side
– Reject conclusion by rejecting second premise
– Protect competition by protecting competitors
• But both sides accept Premise 1!
Brennan: Exclusionary Conduct 8/29/2010 10
Implications of the present standpoint
• Consensus has proven difficult
• Familiar Type I error of false positives: Inconsequential or
beneficial practices attacked
• But don’t forget Type II error: Harmful practices may be ignored
– Using inappropriate screens
– Monopolization ignored because firm didn’t look big enough
– Misidentifying the relevant upstream market
• Encourage ―anything can happen‖ non-robust theory
– Game theory can make evaluating practices more difficult
– Canceling theorists making litigation harder, especially for new,
smaller agencies and courts
– Can courts handle hard theory? (Microsoft example)
– Benefits of possible precision vs. costs of error, process abuse
Brennan: Exclusionary Conduct 8/29/2010 11
Why not reject Premise 1?
• Emphasis on rivalry has made monopolization cases harder to
bring and justify
• Focus not on rivalry in primary market but on cornering
previously competitive complement market
• Complement market monopolization (CMM) hallmark of exclusion
• Use horizontal, not predatory screens to assess that
monopolization
• Possible approach to bundling cases
• Rescue good vertical cases in regulated sectors
– U.S v. AT&T (1982) contrasted with Verizon v. Trinko (2004)
– Regulation as evidence of risk, not excuse to walk away
• Bring much of monopolization law in line with less problematic
collusion, merger law
Brennan: Exclusionary Conduct 8/29/2010 12
Not all monopolization cases are the same
• Exclusion different from predation cases
– Unnecessary, spurious screens invoked because of anti-rival focus
– Exclusion cases may be too hard to bring
• Exclusion cases involve monopolizing a new market
• Raising entry barriers means the cost of something needed to
enter goes up
– That’s where the relevant market is!
• Market power not the ability to exclude from X
– That requires market power over something outside X needed to
enter, supply, and compete in X!
• Don’t try to find common standard with predation cases – the
effects are not the same
• But how to tell the easy cases from the controversial cases?
Brennan: Exclusionary Conduct 8/29/2010 13
A solution? First, classifying business practices
Distant effects
Proximate effects Bad Good
PBDB PBDG
(Proximate (Proximate
Bad
Bad, Distant Bad, Distant
Bad) Good)
PGDB PGDG
(Proximate (Proximate
Good
Good, Distant Good, Distant
Bad) Good)
Brennan: Exclusionary Conduct 8/29/2010 14
Second, antitrust-related examples
Distant effects
Proximate
Effects Bad Good
PBDB: PBDG:
Price fixing, market ―Rule of reason,‖
Bad
allocation, horizontal efficiency defenses,
mergers vertical restraints
PGDB: PGDG:
Predatory pricing, Market generally,
Good bundling, capacity buyer-to-seller,
expansion, complement
preemptive patents providers
Brennan: Exclusionary Conduct 8/29/2010 15
Third, subdividing monopolization cases
Distant effects
Proximate effects Bad Good
PBDB: Exclusion, PBDG:
complementary Vertical restraints
market without negative
Bad
monopolization via strategic effects,
contract or rebate, efficiency defenses
regulatory evasion for exclusion
PGDB, as before:
PGDG:
Predatory pricing,
Distant harms
Good bundling, capacity
unproven, failure to
expansion,
exclude or recoup
preemptive patents
Brennan: Exclusionary Conduct 8/29/2010 16
Failure to distinguish, and its costs
• US: Treat PBDB like PGDB, focus on minimizing Type I error
– Cases far too difficult
– The fallacious syllogism
– Erroneous screens
• EU: Treat PGDB like PBDB, focus on minimizing Type II error
– Presumption of bad behavior even with proximate goods
– Dominance => abuse?
– Willingness to consider ―efficiency offenses‖
• Quest for the ―holy grail‖ of a single monopolization standard
– Treating all cases alike fails to minimize error costs
– Take distinction between exclusion and predation seriously
– Customize screens to the two different situations
Brennan: Exclusionary Conduct 8/29/2010 17
Complementary market monopolization (CMM)
• To exclude, must raise complement prices
• => Acquiring market power over an complement, e.g., an input
– ―Exclusion,‖ ―foreclosure‖ as tying up the market for the complement
– Retailing, distribution, shelf space, typical examples
– Input example: Beer company signs exclusives with networks for TV
ads
– Barriers to entry raised outside the market, not within the market
• Complementary market monopolization like mergers
– What would happen if contracted complement providers merged?
– E.g., those who had signed exclusive dealing contracts?
• The key to reconciling exclusion with merger, collusion law
Brennan: Exclusionary Conduct 8/29/2010 18
Using merger-based effects tests
• Allows application of merger frameworks, empirical techniques!!
• E.g., US Horizontal Merger Guidelines (HMGs)
• Relevant market is the complement, not the upstream product
– Apply ―SSNIP‖ standards for market delineation
– Treat conduct ―as if‖ merger among complements suppliers
– Share of complement mkt. controlled, e.g., via exclusionary contracts
– Is that market easy to enter?
• Carlton’s idea of the ―shadow price‖
• CMM comes up indirectly in cases–make it the prime focus
• Use instead of predation based tests!!
– Profit sacrifice, equally efficient competitor, prior dominance
– Appropriate for high burdens, but not for PBDB exclusion
Brennan: Exclusionary Conduct 8/29/2010 19
Finesse (in part) market delineation for monopoly
• Monopolization, abuse of dominance currently requires finding of
a monopoly (dominance) that is then abused
• No good answer on how to do that
– Different from mergers, with ―make matters worse‖ counterfactual
– Everybody has a little market power in a differentiated product world
– Cellophane fallacy: observed substitution doesn’t answer question
– ―Monopoly‖ profits could come from inframarginal rent
– Overall cost coverage requires lifetime data
– So complicated that much of U.S. v Microsoft was about whether MS
had a monopoly in which operating system market
• CMM approach avoids problem
– Use HMGs approach: Does practice make complement market
worse?
– Problem still needs to be solved, but for regulation, not antitrust
• [Aside for later?: A ―hypothetical regulator‖ test?]
Brennan: Exclusionary Conduct 8/29/2010 20
Vertical irrelevance and relevance
• Irrelevance
– Complement, input market power necessary, sufficient for concern
– Why should the identity of the monopolizer of that market matter?
– Don’t dismiss because the monopolizer too small in primary market
• Vertical relevance
– Market delineation: Like using buyer information in a merger
– Derived demand: Are affected buyers a relevant market?
– Flesh out ―unilateral‖ story: Can X% firm raise input price?
• How much does price have to go up to have significant effect?
– A small margin can create a huge competitive advantage
– Still need model to assess effects
• But predation-based tests still should not be used!
Brennan: Exclusionary Conduct 8/29/2010 21
Questionable test #1: Profit sacrifice, ―but for‖ test
• Sometimes called ―no business sense‖; essentially the same idea
• Any investment has positive opportunity cost, so need something
relevant to competition concerns
• Why give primacy to welfare of alleged perpetrator?
– If complement market monopolized, why does price paid matter?
– Irrelevance of ability of complement suppliers to extract profits
– Like ascertaining crime by looking at criminal rather than victim
• ―But for‖ test need doesn’t imply economic harm or benefit
– ―Free‖ innovations can reduce welfare; even though would’ve been
undertaken even without exit
– Induce exit by less efficient competitor; price goes up
– Some beneficial innovations may not be profitable unless rivals exit
Brennan: Exclusionary Conduct 8/29/2010 22
Additional ―profit sacrifice‖ considerations
• Wrong answer in regulatory evasion, network externality cases
– Refusal to interconnect immediately profitable
– Maintain network monopoly to evade regulation
• Exclusion via bundling isn’t predation
– Absolute exclusion shouldn’t be the test
• ―Raising rivals’ cost‖ contribution: The lack of need for a profit
sacrifice
• Tantamount to absolute efficiency defense
– No profit sacrifice implies practice has a penny of efficiency
– Makes conduct immune if even trivially efficient
Brennan: Exclusionary Conduct 8/29/2010 23
The ―Π sacrifice‖ irony – indicator of efficiency!
• Recall the Chicago argument regarding vertical restraints
– E.g., Telser, ―Free trade‖ with RPM
• Vertical practices involve profit sacrifice
– Tying reduces demand for the monopolist’s product
– Upstream monopolist wants lower retail price, given wholesale price
– Avoid cost of dealing with regional monopolist
– Pay retailers more to be exclusive dealers
• Dominant firm ostensibly better off with complement competition
• ―Chicago‖ inference: Profit sacrifice => unrecognized
efficiencies
– Solving principle-agent problems with incomplete contracting
• How do we know if …
– We aren’t repeating 100 year old US AT mistakes?
– When our accounting of profits is complete?
Brennan: Exclusionary Conduct 8/29/2010 24
Questionable test #2: Equally efficient competitor
• Inefficient competitors are competitively relevant
– Bertrand homogeneous products
– Dominant firm, competitive fringe
– Cournot oligopoly
– All have prices below the monopoly price
• Dubious standard even for predation
– Justification as test for competing too hard
– Would allow above costs tests to exclude
– Predating against less efficient competitors could reduce welfare
• Elhauge: Equally efficient where? Everywhere? At the margin?
• Lesson: Type I, Type II errors different for exclusion, predation
cases
Brennan: Exclusionary Conduct 8/29/2010 25
Questionable test #3: Prior dominance
• Focus is on the wrong market
– Dominance neither sufficient (EU) nor necessary (US)
– Excuses actions by firms that don’t have prior monopoly, yet tie up
complement
• Inherent contradiction in litigation
– To establish prior monopoly, show high barriers, etc.
– But if entry that hard, does practice at issue matter?
• U.S. v. Microsoft example
– Microsoft dominance: Lock-in, scale economies, network effects
– But then what’s the threat to application platform monopoly?
• Posner’s ―fragile monopoly‖ a useful concept:
– If monopoly secure, efficiency likely motive
• The ―but for‖ test: would monopoly exist if practice banned?
Brennan: Exclusionary Conduct 8/29/2010 26
Dominance a defense, not condition of guilt?
• Large size in one market suggests large involvement upstream
– Restraints commensurate with scale
– Improve coordination with similar size of input market
– Disproportionality would warrant concern
• Marginal harm from upstream monopolization not great
– Even if ―single monopoly profit‖ special case, more profit taken at one
stage, less to be taken at others
– Exceptions may enhance welfare (price discrimination, more efficient
input mix)
• Place burden of showing no effect from CMM on defendant
• Eliminating double marginalization not quite on point
– Applies only if market power inevitable at both stages
– CMM assumes (more or less) competition in complement
Brennan: Exclusionary Conduct 8/29/2010 27
Reality check: Should screens apply to mergers?
• Profit sacrifice?
– Block only mergers unprofitable but for the exercise of market
power?
– Not just total welfare, but absolute efficiency defense
– Gut enforcement
• Equally efficient competitor?
– Defend any merger if one party less efficient than another
– Allow most efficient firm to buy up all less efficient competitors
• Even prior dominance
– Some market share matters, of course
– But with very large market share, harder to tell that the merger will
make matters worse
• Relevance: View CMM as ―as if‖ merger in complement market
• Same points for collusion:
– Screens irrelevant, even if effects matter (e.g., CA ―undue‖ SLC)
Brennan: Exclusionary Conduct 8/29/2010 28
Applications to some exclusion cases
• Heinz (Canada)
– Alleged monopolization: Baby food companies sign contracts for
carriages, prime display at retail
– Real monopolization: Market for retail display
– Focus: Ease of entry into complement market, e.g., ―shelf space‖
• Dentsply
– Alleged: Artificial teeth via exclusive contract with dealers
– Real monopolization: Market for distributing teeth to dental labs
– Focus: Entry into distribution market, including self-provision
• U.S. v Microsoft
– Alleged monopolization: ―Intel-based PC operating systems‖
– Real monop.: Browser distribution via PC inclusion, ISP promotion
– Focus: Could Netscape get its browser out effectively?
– Remedy: DOJ settled primarily on eliminating exclusive contracts
Brennan: Exclusionary Conduct 8/29/2010 29
Some lessons from those cases
• Core issues: Share, entry into relevant complement market
• Monopolization of that complement market (e.g. distribution)
– If distribution not affected, competitors can’t be excluded
– Look at how exclusive contracts tie up market, ―as if‖ merged
• Profit sacrifice, equally efficient competitor not relevant
• Monopolization paradox: Having monopoly in order to monopolize
– Microsoft OS dominance (lock-in, scale economies, network effects)
– Denstply in teeth, Heinz in baby food
– But then what’s the problem?
• Dominance as defense?
– Have dental distribution share match upstream market
– Incentive to develop ―middleware‖ by capturing rents
– Avoid double marginalization (e.g., browser + OS monopolies)
Brennan: Exclusionary Conduct 8/29/2010 30
Bundling, discounts, rebates, etc.
• Dominant topic in antitrust debate
• Is the relevant test a predation-based standard?
– Does discount lead to pricing below cost?
– Does/would it exclude equally efficient competitor?
• State of U.S. law
– SmithKline v. Eli Lilly: Bundle price need not be below variable cost
– LePages v. 3M won at divided Third Circuit Court of Appeal; Supreme
Court denied review
– DOJ, FTC: Review would be ―premature‖; issues ―novel and difficult‖
• Focus of recent models
– Nalebuff: Bundling exclusionary entry barrier
– Greenlee, Reitman, Sibley: Bundling reduces welfare if stand-alone
prices rise
Brennan: Exclusionary Conduct 8/29/2010 31
Limitations of models
• Nalebuff
– Bundling increases consumer and total welfare in all equilibria
– Would allow competitors to agree not to enter each other’s markets
• Limits of other bundling models
– Rent extraction, but welfare often up (GRS like 2 part-tariff)
– Like price disc., results depend on unobservable correlations
– Whinston – tie hardens output commitment, but ever observed?
• Consumers buy in models, but cases about intermediate markets
– Concord Boat v. Brunswick (engine discounts to manufacturers)
– LePages v. 3M (discounts for carrying 3M’s house brand tape)
– Ortho Diagnostic Systems v. Abbott Laboratories (Abbott discounted
virus screening tests but legal as above Ortho’s costs)
– SmithKline v. Eli Lilly (Lilly bundled antibiotics in sales to hospitals)
– CA Canada Pipe (full line discounts to cast iron pipe distributors)
• Use CMM exclusion approach, not predation
Brennan: Exclusionary Conduct 8/29/2010 32
Canadian pioneering: Canada Pipe
• Allegations (from initial Bureau notice of application)
– Canada Pipe holds monopoly in relevant market in cast iron drain
pipe
– Instituted ―Stocking Distributor Program‖ provides rebates (up to
20%) for distributors who purchase exclusively from Canada Pipe
– Equivalent to exclusive dealing, forecloses distribution
• Lost at trial (from Tribunal decision)
– SDP exclusive, but with no anticompetitive effects; not ―predatory,
exclusionary, or disciplinary‖
– Found some entry from imports and a new manufacturer
– No switching costs; SDP not contractual, distributors could leave at
any time
• Key argument control over distribution of pipe
• Currently under appeal – should total exclusion be necessary?
Brennan: Exclusionary Conduct 8/29/2010 33
Bundle discounts via CMM: A first screen
• Issue fundamentally static upstream monopolization
– Not tying for rent extraction (Nalebuff, Sibley et al.)
– Nor commitment (Whinston)
• Intermediate good (CM) focus
• First screen: Whether bundling ties up complement market
– Reach of the bundle
– Necessary and sufficient condition
– HMGs approach to market definition, informed by ―buyer‖ market
• Examples
– Outlets needed to sell unbranded tape
– Distributors of false teeth to denture labs
– Distributors of cast-iron drain pipe
Brennan: Exclusionary Conduct 8/29/2010 34
Second tentative screen
• Resemblance to exclusive dealing: Is loss of discount from
carrying competitor equivalent to payment for breach of
exclusive dealing contract?
• How much does exclusive dealing raise complement price?
– Exclusive contracts not absolute
– Entrant has to compensate distributor for the breach payments.
– These will be based on the incumbent’s lost profits (Price – short run
marginal cost) from breach of contract, implying …
– Entry possible only if it can undercut the incumbent’s marginal cost
• Is exclusive dealing breach the right quantitative standard ?
– Courts may find that short-run marginal cost is very low
– Less efficient competitors could knock down price
– For intermediate goods, a small price increase can create great
competitive disadvantage
Brennan: Exclusionary Conduct 8/29/2010 35
Observations on remedies
• Exclusive dealing, rebates, bundling not good or bad per se
• The harm arises from CMM, but OK short of monopolization
• Ideal remedy not ―all or nothing‖, but share based, like mergers
– Identify level of exclusive contracting that is non-threatening
– OK to exclude, but only if one does not go beyond X% of the relevant
complement market (distribution, retailers)
• Effective remedies assume competition in complement market
– Prior retail, distribution monopoly perhaps a DM defense
• Can an upstream monopolist leave money on the table?
– Share of market with money left?
• Share-limited remedies may reveal anticompetitive effect, if
dropped if they can’t cover the whole market
Brennan: Exclusionary Conduct 8/29/2010 36
Other issues that may arise in exclusion cases
• Tying, bundling can exclude but need not be anticompetitive
– Hurts rival, but consumers may be better off
– Add product features, quality control, shopping convenience
• Consider ―aftermarket‖ cases (locked-in consumers) as contract
breach, consumer protection matters
• Predation, dynamic cases may not be reducible to the direct
exclusion ―complementary market‖ format
– Microsoft as example
– Controlling browser, media player distribution vs. preempting future
competition in application platforms
• Sector regulation need not reduce the need for antitrust
– Regulation can make anticompetitive conduct more likely, e.g., U.S.
v. AT&T (contrast 2004 USSC Trinko decision)
– When can antitrust apply in regulated sectors? [CA ―regulated
conduct‖, US ―state action‖ doctrines, UK CA98 S.10(1)(a)]
Brennan: Exclusionary Conduct 8/29/2010 37
Elhauge’s monopolization test
• Does a practice by a monopolist discriminate against rivals?
• Allows refusals to deal if uniform, but not targeted
• Fundamental flaw: Does it work when most needed?
– Some inputs are bought only by rivals
– Network elements, operations support in telecom markets
– Bridge access in Terminal Railroad
• Either no discrimination, since only rivals are buyers
• Or discrimination an almost certain byproduct of vertical
integration, making VI by a monopolist abusive per se
• Also, is anything equivalent to price discrimination per se OK?
(Carlton, IIOC)
Brennan: Exclusionary Conduct 8/29/2010 38
Exclusion: monopoly creation, not maintenance
• ―Create‖ focus appropriate for exclusion cases
– Has a monopoly/market power been created in a complement market
that was not there before?
– Look at using familiar merger, collusion horizontal terms, e.g., MEGs
• ―Maintain‖ leads to the problems
– Sets up entrants, small competitors as targets to be protected
– Focuses on inhibiting competition, leading to high if not impossible
tests
– Looks at the wrong market, introducing error in both directions
– Forces establishment of monopoly that’s being maintained
– Fits predation cases, perhaps, but not exclusion
– Dominance neither necessary nor sufficient
– Profit sacrifice as absolute efficiency excuse
– May lead to focus on intent rather than effect
• Promote monopolization law by reducing its scope?
Brennan: Exclusionary Conduct 8/29/2010 39
Summary
• Not all monopolization cases are the same: Exclusion distinct
from predation
• Fallacious syllogism: monopolization led awry by focus on rivals
• Those with direct bads, like exclusion, can be addressed as we
do mergers, collusion
• These involve complementary market monopolization approach
which can clarify analysis, remedy in exclusion cases
• Profit sacrifice, equally efficient competitor, prior dominance,
problematic screens for exclusion cases
• Vertical matters to get story straight, as in merger cases
• Applies to exclusion cases, perhaps bundling
• Focus on ―create‖ monopoly in complement market rather than
―maintain‖ monopoly in primary market
Brennan: Exclusionary Conduct 8/29/2010 40
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