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                       AND ASPEN

                             PETER C. CARSTENSEN*

              The decisions in Aspen and Trinko point the law of monopolization
      in different directions. Aspen offered a nuanced standard that focused on
      balancing the risks to competition from exclusionary conduct against the
      potential legitimate business needs of a monopolist to engage in such
      behavior. Trinko, in contrast, celebrates the right of the monopolist to
      exploit the market by excluding competition in the interest of, apparently,
      encouraging technological innovation rewarded by monopoly profits.
      Moreover, the case expresses great concern about false-positive decisions
      finding violations when in fact none exist. The Trinko Court and supportive
      commentators assume that such decisions are common and very harmful to
      economic efficiency.
              This Paper argues that Aspen and the cases following it provide the
      better approach to exclusionary monopolistic conduct. Monopoly is
      economically undesirable from both static and dynamic perspectives. The
      concern for false positives rests on incorrect and implausible assumptions
      while false negatives in fact create a more serious risk to the competitive
      process. Hence, the law of monopolization should embrace the stricter
      scrutiny mandated by Aspen, or if there are real risks of inefficient results,
      monopoly law should return to its historic mission of dissipating the
      monopoly power itself by dissolution of the monopolist or some other
      remedy that would in fact eliminate the undesirable and unnecessary
      monopoly power.

Introduction................................................................... 296
    I. The Road to Aspen and on to Trinko ............................. 297
   II. Efficiency and Monopoly........................................... 304
       A. Monopoly in Economics and Public Policy ................ 304
       B. The Case against Strict Standards to Govern
            Monopolistic Conduct ......................................... 307
       C. The False Premises behind the Concern with False
            Positives ......................................................... 309
            1. Proposition One: Courts Make Frequent False-
               Positive Mistakes in Antitrust Decisions ............... 310
            2. Proposition Two: Antitrust Rules are Effective in

      *       Professor of Law, University of Wisconsin Law School. A much earlier
version of this Paper was presented at the Law and Society Annual Meeting in 1998.
The comments at that meeting as well as those of Lindsay Hampton have contributed
greatly to the development of this piece. I am also indebted to Andrew Wang for
diligent research assistance. Errors, unfortunately, remain my responsibility.
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              Barring Efficient Conduct ................................ 315
          3. Proposition Three: Existing Market Structures Are
              Natural and Efficient ...................................... 318
      D. The Danger of False Negatives .............................. 321
      E. The Falsification of the False-Positive Mantra ............ 321
 III. False Positives, False Negatives, and the Future of
      Monopoly Law....................................................... 322
      A. The State of the Law and Its Prospects ..................... 322
      B. What about a Structural Response to Monopoly? ......... 328
Conclusion.................................................................... 329


      If, as Mao is reported to have said, “there are many roads to
socialism,” then it seems unlikely that there is only one road to
economic efficiency in a market economy. The central argument of this
Paper is that the fear of false positives (i.e., holding exclusionary
conduct by a monopolist unlawful when it should not be so held) is ill
suited to the long-run needs of a market economy. It rests on mythical
beliefs about the deterministic character of both law and economics.
These myths rest on perceptions that there is but a single road to
economic efficiency, that most markets in America are so narrow and
restricted that only a monopolist can serve them efficiently, and that
legal rules forbidding specific conduct effectively preclude monopolists
from achieving efficiency-enhancing goals altogether. From these same
myths there comes a stubborn hostility to structural remedies that would
either dissipate the monopoly power itself or dissolve the monopolist—a
corporate death penalty. Yet if false positives were a genuine concern,
given that monopoly itself is economically undesirable, structural
remedies eliminating monopoly power but leaving the enterprise free to
conduct its business without regulation would seem the preferable
strategy. Indeed, in business there is great enthusiasm for buying and
selling corporate assets.
      Aspen Skiing Co. v. Aspen Highlands Skiing Corp.1 and its recent
descendants, such as United States v. Microsoft Corp.,2 Conwood Co.
v. U.S. Tobacco Co.,3 LePage’s Inc. v. 3M,4 and United States v.
Dentsply International, Inc.,5 take a more Maoist view of the road to
efficient markets and so risk the occasional false positive to avoid the

      1.       472 U.S. 585 (1985).
      2.       253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam).
      3.       290 F.3d 768 (6th Cir. 2002).
      4.       324 F.3d 141 (3d Cir. 2003) (en banc).
      5.       399 F.3d 181 (3d Cir. 2005).
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more serious risk of a false negative. Verizon Communications Inc. v.
Law Offices of Curtis V. Trinko, LLP,6 by its narrow and grudging
interpretation of Aspen, which is based on a concern for false positives
and a desire to protect entrenched monopoly, revives the economic
determinism found in some pre-Aspen cases. Trinko’s vision rests on
bad economics and a misplaced faith in a lawless marketplace.
     This Paper joins the debate over the scope and nature of
interventions by antitrust law against exclusionary conduct by
monopolists very much on the side of the Aspen perspective of critical
analysis. Part I traces the doctrinal road that led to Aspen but has
continued to Trinko. It offers an explanation for the doctrinal confusion
that besets monopoly law. By recognizing the tension between the
Aspen and Trinko perspectives on exclusion, it provides a motivation
for the following two Parts.
     Part II discusses the myth of efficient monopoly in both static and
dynamic terms. The indisputable fact is that monopoly is not desirable
from either perspective. Hence, rules that undermine monopoly, in
general, make a positive contribution to the long-run efficiency of the
economy, even if they may have short-run costs. Consequently, the
greater danger for economic efficiency is in false negatives (decisions
allowing anticompetitive, exclusionary conduct by monopolists) rather
than false positives (decisions mistakenly banning specific conduct used
to achieve a legitimate goal).
     Part III examines the implications of false-positive and false-
negative concerns in recent monopoly cases to highlight the continued
tension in this area of the law. This Part also discusses the general
question of remedy and takes the position that if there were a legitimate
concern for false-positive decisions that unduly regulate the conduct of
monopolists, then the proper remedy would be eliminating the
monopoly power rather than allowing it to continue under some
dysfunctional regulation.

                     I. THE ROAD TO ASPEN AND ON TO TRINKO

     The evolution of doctrine governing monopolistic conduct has
followed an uncertain path. The cases prior to the late 1960s were
largely government challenges to the merits of long-term, durable
monopolies. The legal standards that emerged from Standard Oil Co. of
New Jersey v. United States,7 United States v. American Tobacco Co.,8

      6.       540 U.S. 398 (2004).
      7.       221 U.S. 1 (1911).
      8.       221 U.S. 106 (1911).
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United States v. U.S. Steel Corp.,9 United States v. Aluminum Co. of
America,10 United States v. E. I. du Pont de Nemours & Co.,11 and
United States v. Grinnell Corp.12 addressed the question of when the
government should be entitled to a remedy that would dissipate the
monopoly power of such firms. The role of conduct in these cases was
never very well theorized. The ultimate statement in Grinnell was that
the “willful acquisition or maintenance” of monopoly was sufficient for
a violation.13 Such a nearly no-fault standard is rational if the goal is to
address failure of the ordinary dynamic, competitive processes by
which the “centrifugal and centripetal forces” of the market overcome
monopoly.14 The core of these cases was proof of a durable,
substantial, and remediable monopoly. The relevance of conduct might
have been only to support the inference that the monopoly was
avoidable. Only by “embrac[ing]” all opportunities to expand
production or engaging in unnecessary exclusion of equally efficient
competitors could such a remediable monopolist survive.15 The issue
was not the legal merits of the conduct itself but the overall
consequence for the market: a durable and substantial monopoly. The
remedy was to dissipate that monopoly power and not regulate its use.16
     However, alongside these major monopoly cases was another set
that was not clearly differentiated and that concerned specific conduct,
usually exclusionary, of monopolists. This set of cases included United
States v. Griffith 17 and Lorain Journal Co. v. United States.18 The
issues in these cases were easily distinguished from the major
structural-monopoly cases. They focused on the merits of specific
conduct having exclusionary effect for which there was no excuse in the
eyes of the courts. Some of these cases became targets for the emerging
Chicago School19 because it was possible to suggest alternative
explanations for the conduct that would have provided an efficiency

     9.      251 U.S. 417 (1920).
     10.     148 F.2d 416 (2d Cir. 1945).
     11.     351 U.S. 377 (1956).
     12.     384 U.S. 563 (1966).
     13.     Id. at 570–71.
     14.     Standard Oil Co. of N.J. v. United States, 221 U.S. 1, 62 (1911).
     15.     Aluminum Co. of Am., 148 F.2d at 431.
     16.     Standard Oil, 221 U.S. at 77–82.
     17.     334 U.S. 100 (1948).
     18.     342 U.S. 143 (1951).
     19.     The Chicago School includes a group of antitrust scholars such as Judges
Robert Bork and Richard Posner as well as economists such as Ward Bowman and
Aaron Director. See, e.g., Richard A. Posner, The Chicago School of Antitrust
Analysis, 127 U. PA. L. REV. 925 (1979); Herbert Hovenkamp, Antitrust Policy After
Chicago, 84 MICH. L. REV. 213 (1985).
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justification.20 To the critics, these decisions seemed to suggest a one-
sided presumption against any conduct having exclusionary effects
regardless of its justification or efficiency implications.21
      The open-ended language of the structural-monopoly cases also
invited private plaintiffs to challenge any conduct by a monopolist that
had an adverse effect on the claimant. The result was a series of cases,
including claims by Telex and Berkey, that essentially sought a
combination of damages and a regulatory injunction that would require
the monopolist to hold a price- and product-disclosure umbrella over its
inefficient rivals.22 Other cases claiming predatory-pricing injuries
raised similar concerns because the prices in fact charged were above
the price that would have been charged in a competitive market.23 In
another instance, SCM sought to piggyback on the Federal Trade
Commission’s (FTC) successful effort to break up Xerox’s copier
monopoly by claiming damages for past injuries resulting from its prior
exclusion from the market.24 These plaintiffs relied on the expansive
language of the structural-monopoly cases to claim damages and
injunctions. Notably absent from these cases was any effort to dissipate
the monopoly power of the dominant firm. In fact, given the apparent
competitive capacity of Telex and Berkey, it is unlikely that they could
have survived in such a market. The lower court decisions reinforced
the concerns of those who feared that monopoly law would paralyze
dominant firms and result in serious economic losses.25
      Indeed, on the basis of the lower-court decisions, there was
understandable concern for the potential adverse effect of unbridled
monopoly law on efficiency. Moreover, juries in Telex Corp. v.
International Business Machines Corp.26 and Berkey Photo, Inc. v.

      20.    See, e.g., ROBERT H. BORK, THE ANTITRUST PARADOX (1978); Robert H.
Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division,
74 YALE L.J. 775 (1965); Lester G. Telser, Why Should Manufacturers Want Fair
Trade?, 3 J.L. & ECON. 86 (1960).
      21.    See, e.g., BORK, supra note 20; Aaron Director & Edward H. Levi, Law
and the Future: Trade Regulation, 51 NW. U. L. REV. 281 (1956); Telser, supra note
      22.    Telex Corp. v. Int’l Bus. Machs. Corp., 510 F.2d 894 (10th Cir. 1975);
Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979).
      23.    For a discussion, see Peter C. Carstensen, Predatory Pricing in the
Courts: Reflections on Two Decisions, 61 NOTRE DAME L. REV. 928 (1986).
      24.    SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981).
      25.    See, e.g., Milton Handler & Richard M. Steuer, Attempts to Monopolize
and No-Fault Monopolization, 129 U. PA. L. REV. 125 (1980); Janusz A. Ordover &
Robert D. Willig, An Economic Definition of Predation: Pricing and Product
Innovation, 91 YALE L.J. 8 (1981).
      26.    510 F.2d 894.
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Eastman Kodak Co.27 not only found unlawful monopolization but also
awarded very substantial damages.28 Lost in the academic noise about
these decisions were other cases of greater merit.29 Moreover, the
courts of appeals, in somewhat-incoherent opinions, reversed the
verdicts in Berkey and Telex while affirming the trial court’s rejection
of SCM’s claims. These results were entirely plausible even if the
articulation was not. The courts were striving for a way to differentiate
between the structural cases that the government had pursued and these
conduct-oriented challenges that sought simply to force the monopolist
to share its winnings. They got little help from the academic
commentators. For example, Professors Phillip Areeda and Donald F.
Turner, deeply concerned about the trial-court decision in the Telex
case, focused on the standards for predation rather than on the question
of appropriate relief or the important functional distinctions between
challenges to monopoly itself and abuses of an otherwise-lawful
monopoly position.30 In addition, the scholars associated with the
Chicago School generally expressed alarm at the degree to which courts
were invited to second guess business decisions.31 If markets are perfect
or nearly perfect, no monopoly will survive unless it rests on
efficiency, and all conduct will be rational because it would be
irrational to try to entrench or extend monopoly power given that the
forces of the market would overwhelm it in any event.
      The FTC joined the effort to reformulate the duty of monopolists.
The In re Borden, Inc. (ReaLemon) 32 and In re E. I. duPont de
Nemours & Co. (Titanium Dioxide) 33 cases provided vehicles for an
increasingly conservative agency to express its concerns and seek to
articulate a more permissive standard for judging the conduct of
monopolists. Again, the FTC did not differentiate between challenges
to the monopoly itself and challenges to specific conduct by the
monopolist. Thus, the courts, the agencies, and the academic observers
all agreed that there was a serious problem with monopoly law because

       27.    603 F.2d 263.
       28.    See Telex, 510 F.2d at 897–98; see also Berkey, 603 F.2d at 268.
       29.    See, e.g., Greyhound Computer Corp. v. Int’l Bus. Machs. Corp., 559
F.2d 488 (9th Cir. 1977).
       30.    See Phillip Areeda & Donald F. Turner, Predatory Pricing and Related
Practices under Section 2 of the Sherman Act, 88 HARV. L. REV. 697 (1975). This
article has spawned a vast literature that largely begs the question of whether price
setting alone should ever be a basis for liability. See, e.g., Carstensen, supra note 23,
at 969–70.
       31.    See, e.g., BORK, supra note 20.
       32.    92 F.T.C. 669 (1978).
       33.    96 F.T.C. 653 (1980).
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it exposed monopolists to unreasonable risks of liability for conduct that
these observers regarded as economically beneficial.
     The United States Supreme Court’s decision in Aspen provided
renewed focus on the merits of the exclusionary conduct of the
monopolist. Grounded in Lorain Journal ’s condemnation of naked
exclusion, the Aspen decision upheld a functional approach to the
problem of exclusionary monopoly conduct that “unnecessarily
excludes or handicaps competitors.”34 Unfortunately, the opinion did
not set forth criteria to implement this overall standard. Instead, the
Court focused on a fact-intensive, case-specific review of the conduct
that resulted in the conclusion that the jury could reasonably have found
that the refusal to permit any kind of combination-ticket sales was
without any legitimate business purpose.
     Given the factual analysis, the Court was not obliged to consider
whether, if there had been a legitimate purpose for some refusal, the
monopolist had a duty to use the least restrictive means available to
implement its lawful goal. This issue is significant because a
monopolist can obtain a greater degree of freedom if it only needs to
show that its goal was consistent with that of a nonmonopolist in a
similar situation, regardless of the competitive effect of the specific
means used to achieve the goal. A standard requiring the monopolist to
avoid unnecessarily restrictive means to achieve its lawful goal, on the
other hand, would impose a stronger constraint on the conduct at issue.
Moreover, the opinion did not set forth any criteria to determine what
objectives of a monopoly business were “legitimate.”35
     The opinion also completed the conversion of monopoly law to a
conduct model by its failure to distinguish the structural-monopoly
decisions36 as ones involving distinct issues and remedies.37 They
simply ceased being important parts of the canon of monopoly law.
Instead, monopoly law after Aspen has come to focus on the specific
conduct of the monopolist.38 Such a shifted perspective necessarily
required different criteria than those relevant to deciding if a durable,
but remediable, monopoly warranted judicial reorganization.
Regrettably, the Aspen transformation did not distinguish between the

      34.    Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 597
(1985) (quoting the jury instructions); see also id. at 605 (considering whether the
exclusionary conduct has “impaired competition in an unnecessarily restrictive way”).
      35.    See Aspen, 472 U.S. 585.
      36.    See supra notes 7–16 and accompanying text.
      37.    See Aspen, 472 U.S. 585.
      38.    See, e.g., United States v. Microsoft Corp., 87 F. Supp. 2d 30 (D.D.C.
2000), aff’d in part, 253 F.3d 34 (D.C. Cir. 2001). This is true even in the one post-
Aspen government case with important structural implications. See id.
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kinds of monopoly cases,39 although the statutory language invited such
a differentiation.40
     The Court followed with the Eastman Kodak Co. v. Image
Technical Services., Inc.41 decision, which extended the Aspen analysis
to a case where the source of market power included intellectual-
property rights.42 Again the articulation of the rationale and standards
left much to be desired, but the functional focus of the analysis was
reasonably clear. The Court balanced these decisions with others,
notably Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.,43
which showed an unwillingness to probe deeply the reasons for
discounting prices.44
     The Aspen and Kodak decisions have, however, excited a great
deal of concern among practitioners and some academics. The concern
is that these cases make it too easy for plaintiffs to prevail when the
dominant firm imposes some exclusionary burden on them. The
speculation is that there might be an efficiency justification for the
conduct. As intellectual property and mergers have created more highly
concentrated markets, this concern has grown. The mantra is that there
is a great danger of false-positive decisions that incorrectly restrict the
freedom of action of dominant firms and cause untold economic losses.
This concern is a recurring theme of those who oppose Aspen and the
cases that apply its critical criteria to review exclusionary conduct.45
     The recent Trinko opinion stands in apparently direct opposition to
Aspen.46 As in Aspen, a monopolist excluded its competitors from
access to essential resources for competition.47 Although Justice
Antonin Scalia attempted in his opinion to distinguish the cases on their

      39.     See Aspen, 472 U.S. 585.
      40.     Basically, “monopolization” could have applied only to cases challenging
the legality of the monopoly itself and seeking a remedy that would dissipate the
monopoly power; “attempt to monopolize” could then provide standards for reviewing
the merits of specific conduct that the plaintiff claimed excluded competition or unfairly
exploited monopoly power. See Sherman Act § 2, 15 U.S.C. § 2 (2000).
      41.     504 U.S. 451 (1992).
      42.     Id.
      43.     509 U.S. 209 (1993).
      44.     Id.
      45.     See, e.g., Thomas C. Arthur, The Costly Quest for Perfect Competition:
Kodak and Nonstructural Market Power, 69 N.Y.U. L. REV. 1 (1994); Daniel F.
Spulber & Christopher S. Yoo, Mandating Access to Telecom and the Internet: the
Hidden Side of Trinko, 107 COLUM. L. REV. 1822 (2007).
      46.     Compare Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko,
LLP, 540 U.S. 398 (2004) (suggesting that failure to cooperate with competitors is not
a valid claim under the Sherman Act), with Aspen Skiing Co. v. Aspen Highlands
Skiing Corp., 472 U.S. 585 (1985) (suggesting a monopolistic competitor’s failure to
cooperate with competitors may violate the Sherman Act).
      47.     See Trinko, 540 U.S. at 403–05.
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facts (arguing, for example, Congress and the FCC had mandated the
sale of the products and services in Trinko while in Aspen there was
evidence that competitive firms had in fact sold the essential elements),
the distinctions were not economically significant.48 More to the point,
perhaps, the opinion focused on the existence of alternative remedies
that directly addressed the abuse of monopoly power though
administrative-agency oversight and control.49 This strand of the
opinion is not inconsistent with an indirect recognition that the original
goal of the Sherman Act’s prohibition of monopoly was to dissipate the
monopoly power itself. But it is fair to say that the thrust of the opinion
was not to return to the older view of monopolization as a structural
     The Trinko opinion stressed the need to protect monopolists and
their “dream[s]”50 from the risk of liability for conduct that affects their

      The opportunity to charge monopoly prices . . . is what
      attracts “business acumen” . . . ; it induces risk taking that
      produces innovation and economic growth. . . . Compelling
      such firms to share the source of their advantage . . . may
      lessen the incentive for the monopolist, the rival, or both to
      invest in those economically beneficial facilities.51

Trinko, therefore, stands in strong contrast to Aspen, which it
characterized as being “at or near the outer boundary of § 2 liability.”52
The decision represents a return to the pre-Aspen cases with their deep
concern for the rights and privileges of monopoly.

      48.     Id. at 409–10. The opinion acknowledged but then ignored the fact that
Congress was seeking to transform the telephone industry from a regulated monopoly
into an industry governed by competition. Id. at 415–16. To do this, Congress
mandated that the incumbent monopolists must sell specific components for use by
competitors rather than requiring the dissolution of the monopolies themselves. Id. at
402. The Court had previously expressed its concerns about some of the pricing
policies that the FCC had put in place for these new products. See AT&T Corp. v.
Iowa Utils. Bd., 525 U.S. 366 (1999). Given the lack of history of competition in the
market for component services, the Court’s emphasis on the lack of experience with a
market in component services seems disingenuous at best. See id. at 366.
      49.     Trinko, 540 U.S. at 413. Trinko involved the telecommunications
industry, which is the subject of extensive statutory control. It is unclear whether
Trinko, despite its rhetoric, will govern exclusionary-conduct cases generally or
whether it sets generous standards for exclusionary conduct where direct regulation can
and did respond to the competitive concerns.
      50.     Id. at 409.
      51.     Id. at 407–08.
      52.     Id. at 409.
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       To determine whether Aspen should survive, it is important to
look at two questions. First, how valid is the concern for false positives
in general? Second, what are the implications of false negatives for
economic efficiency? The responses offered in the next Part provide a
general economic-policy perspective on the question of whether it is
important to protect monopolists from the risks of false-positive
decisions. That analysis provides the basis for this Paper’s conclusion
that Aspen provides the better approach to exclusionary conduct and
may (as well as ought to) dominate Trinko’s promonopoly stance.

                           II. EFFICIENCY AND MONOPOLY

                     A. Monopoly in Economics and Public Policy

      Efficient production of goods and services is a fundamental
concern for any economy. Of equal importance for the long-run growth
of an economy is the maintenance of the dynamics in the systems that
stimulate and support innovation and evolution. Of the two, in the long
run the dynamics of markets are more important than achieving optimal
static efficiency at any point in time. The choice between these goals is
an issue only if there is an inconsistency between them. Indeed,
although the Schumpeterian vision of creative destruction may pose
such a conflict,53 it actually mandates a stricter view of monopolistic
conduct that limits or delays the destruction of market power.
      It is textbook economics that monopoly is inconsistent with static
efficiency because the monopolist will raise its price and reduce its
output to extract economic rent. As a result, the economy experiences
suboptimal production and allocative inefficiency. Rational
monopolization includes a long-term perspective in which the future
casts a “large shadow” over the present.54 The long run invites
investments that increase the durability and strength of the underlying
market position but that increase neither productive nor distributional
efficiency. The monopolist will expend its resources to entrench and
protect its continued ability to reap those profits.55 Specifically, it may

(2d ed. 1947).
      54.    ROBERT AXELROD, THE EVOLUTION OF COOPERATION 174 (1984); see also
Peter C. Carstensen, Vertical Restraints and the Schwinn Doctrine: Rules for the
Creation and Dissipation of Economic Power, 26 CASE W. RES. L. REV. 771 (1976).
      55.    Judge Posner has shown that the rational monopolist will expend nearly all
its monopoly profits in this way in order to protect its long-run monopoly position.
Richard A. Posner, The Social Costs of Monopoly and Regulation, 83 J. POL. ECON.
807, 824–25 (1975).
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engage in activities that frustrate and deter both existing and potential
     A law-abiding monopolist seeking a legitimate, efficiency-
enhancing objective, having a choice among lawful strategies, would
rationally choose the one that could accomplish its primary goal and
also increase or preserve barriers to entry or reduce the potential for
competitors encroaching on its market position. It would be rational to
do this even if the strategy chosen involved somewhat greater short-
term costs or sacrificed some of the efficiency gain, provided that the
expected gains from the exclusionary effect offset those extra costs.56
Indeed, any other choice would be economically irrational and might
even constitute a breach of fiduciary duty to the monopolist’s
shareholders.57 The incentives of a rational monopolist, therefore,
would seem to suggest that any conduct having exclusionary effect
should be subject to strict scrutiny.
     A different complaint against monopoly is that it is wasteful and
inefficient. The monopolist, entrenched behind its entry barriers, can
expend resources on excessive executive pay, lavish offices, and
acquisitions that bulk up the corporate enterprise without contributing
any gains to the economy. The monopolist will have less incentive to
seek out and develop lower-cost methods of production or expand the
array of products available to consumers. The monopolist looks to its
own interests and seeks to protect them in a context where it has a
significant degree of discretion. This undesirable dimension of
monopoly is captured in the concept of X-inefficiency.58 Reducing the
barriers to entry creates a positive incentive for such monopolist to
operate in a more efficient manner.

       56.    The rational monopolist seeks to maximize profits, not efficiency. Hence,
it will balance the costs of increasing the strength or durability of its monopoly power
against the costs of doing so. See Posner, supra note 55, at 824–26. When the
monopolist can improve efficiency and also increase exclusion by its choice of conduct,
in making a decision it will balance any increased costs of available exclusionary
methods against the projected gains to its monopoly, net of any efficiency loss that
might result from using a lower-cost but less exclusionary option. It would be irrational
for a monopolist not to consider both efficiency and exclusionary gains in selecting
among the ways to achieve an efficiency-enhancing goal.
       57.    The managers of a corporate enterprise owe a fiduciary duty to the
shareholders to maximize their wealth. Hence, the failure to balance the gains from
lawful exclusion of competition against any increased costs would seem to constitute a
breach of that duty. In practice, the business-judgment rule probably shelters managers
from direct liability, but managerial incentive structures that reward profitability with
prestige and bonuses may well provide a more relevant alternative.
ECONOMIC DEVELOPMENT 17, 43–44, 160 (1978).
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     The short-run efficiency costs of monopoly are well known and
well proven. But in some respects, the greater costs are in the dynamics
of technological change and growth. A monopolist has no incentive to
support technological innovation that could undermine its dominant
position in the market. Moreover, having sunk investments in existing
technology, it may well delay or refuse to pursue work on new
technology until it has accounted for its past investments. In addition,
when only one decision maker controls the evolution of technology,
there is a real risk that its internal priorities and decision processes will
induce it to pursue the wrong or less desirable paths.59 Competition in
innovation, given the extreme uncertainty of what is likely to prove
most desirable in some future world, is a long-run feature of vast
importance to a dynamic economy. The famous aphorism that the
greatest benefit of monopoly is the quiet life speaks strongly to this
aspect of monopoly.
     The classic monopoly cases provide direct proof of these costs.
Standard Oil used its monopoly power to keep prices higher and output
lower as well as raise its rivals’ costs.60 Indeed, after the breakup of the
monopoly, the history of antitrust is that the survivors sought
repeatedly to resurrect market power through collusion and restrictive
downstream agreements.61 More recently, the breakup of AT&T
released an enormous amount of technology held back because it was
inconsistent with that company’s economic self-interest.62 The
transformation of the copying-equipment market after the dissolution of
Xerox’s patent monopoly provides yet another example—new
technology flourished and prices dropped dramatically.63

      59.   See Richard J. Gilbert & Steven C. Sunshine, Incorporating Dynamic
Efficiency Concerns in Merger Analysis: The Use of Innovation Markets, 63
ANTITRUST L.J. 569, 570, 574–76, 579 (1995).
       60.    Donald J. Boudreaux & Burton W. Folsom, Microsoft and Standard Oil:
Radical Lessons for Antitrust Reform, 44 ANTITRUST BULL. 555, 559 (1999) (noting
that the price of kerosene in the 1890s was ten to twelve times greater than production
cost); Elizabeth Granitz & Benjamin Klein, Monopolization by “Raising Rivals’
Costs”: The Standard Oil Case, 39 J.L. & ECON. 1, 8–10 (1996) (describing how
Standard Oil collected a rebate from the railroads calculated on the basis of the quantity
of oil shipped by its rivals).
       61.    See, e.g., Simpson v. Union Oil Co. of Cal., 377 U.S. 13 (1964);
Standard Oil Co. of Cal. v. United States, 337 U.S. 293 (1949); United States v.
Socony-Vacuum Oil Co., 310 U.S. 150 (1940).
       62.    See, e.g., MCI Commc’ns Corp. v. AT&T, 708 F.2d 1081, 1098 (7th
Cir. 1983) (noting that AT&T blocked the introduction of long-distance microwave
technology to protect its investment in land lines).
       63.    In re Xerox Corp., 86 F.T.C. 364 (1975); see Willard K. Tom, The 1975
Xerox Consent Decree: Ancient Artifacts and Current Tensions, 68 ANTITRUST L.J.
967 (2001).
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     In short, there are powerful reasons for condemning monopoly.
This fundamental fact is too often overlooked in contemporary policy
discussions and judicial decision making. It is useful next to consider
the reasons for this sympathy for the “malefactors of great wealth.”

                     B. The Case against Strict Standards to
                         Govern Monopolistic Conduct

     Although monopoly is undesirable, many antitrust academics and
judges believe that public policy should be very cautious in upholding
any challenge to such enterprises.64 But large firms controlling
significant sectors of the economy invite direct government regulation
and are more able to seek out and obtain government protection. A
central theme of public-choice analysis is the rent seeking and
protectionism provided by government process. Banks or car makers
that are “too big to fail” get protection and subsidies. Yet many of
those who subscribe to public-choice theories when it comes to
government regulation, as do some antitrust scholars,65 seem unwilling
to insist on more rigorous control over either the structure or conduct
of firms with dominating market positions despite the public-choice
analysis showing that these firms are likely to distort government
     One justification for monopoly is the dynamic interest in
technological progress. The Schumpeterian hypothesis is that monopoly
profits are the great incentive for innovation.67 Over time, monopoly
will arise with technological advances only to be replaced by new
technology. This vision leaves a major unanswered question, How

       64.    See, e.g., Arthur, supra note 45, at 5.
       65.    Fred S. McChesney, Public Choice and the Chicago School of Antitrust,
Friedrich Schneider eds., 2003). Professor McChesney is one of the leading critics of
how antitrust law is enforced. See, e.g., THE CAUSES AND CONSEQUENCES OF
Shughart II eds., 1994); Robert D. Tollison, Public Choice and Antitrust, 4 CATO J.
905, 910–11 (1985), available at
       66.    A question beyond the scope of this Paper is why public-choice scholars
do not question the expansion of intellectual-property rights. This expansion by
legislative and judicial fiat protects and entrenches select economic interests at the
expense of the overall market and consumer welfare. Apparently, the term property
mesmerizes the public-choice analysis such that its proponents are not able to get
around the use of a misleading label that conceals a governmental allocation of
DISCONTENTS (2004); Mark A. Lemley, Property, Intellectual Property, and Free
Riding, 83 TEX. L. REV. 1031, 1032 (2005).
       67.    This belief is a significant basis for the Trinko opinion. See Verizon
Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004).
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much monopoly, for how long, is essential to achieve this churning of
the economy? The implicit conclusion of those who rely on this model
to justify monopoly is that the reward must be very substantial.68
Hence, the legal system should be very reluctant to interfere with the
conduct of the monopolist.
     Thus stated, the model seems naive and questionable. The goal of
monopolists, once they have monopolies, is to preserve and protect
themselves. Hence, it would seem that the advocates of this model
should be deeply concerned with the scope and duration of intellectual-
property rights that can frustrate innovation as well as with other
conduct that creates significant barriers to entry. Such rights and
conduct directly increase the costs for the next wave of technological
advance. Yet it is hard to find in this literature recognition of the need
to keep pathways open for new entry.69 The concern is largely for the
already-successful innovator and its reward. One explanation for this
protectionist approach to incumbent monopolists is a belief that such
firms are the only entities that can or will innovate but will do so only
if promised massive rewards for such creative destruction of their own
prior market power. Such a belief stands Schumpeter’s model on its
head and excuses entrenchment of existing monopoly.
     A second strand to the defense of monopoly focuses on the social
and economic costs of conduct-oriented remedies themselves. If a court
or agency acts as the reviewer of business decisions, it has the potential
to stultify and rigidify conduct in ways that do not advance either static
efficiency or dynamic progress. An example of this danger is the
ReaLemon decision of the FTC. The FTC found that Borden sold
ReaLemon at below-cost prices (i.e., predatory prices) in certain
geographic markets in order to interfere with the growth of small
competitors in the reconstituted-lemon-juice market. The remedy was a
price-regulation order that commanded that Borden not price below the
FTC’s definition of a reasonable price. Such regulatory control, even if
well informed, could create serious burdens on the operation of a firm.
It must always consider and perhaps even check with its government
controller before offering discounts.70
     The decree in the Microsoft case may present similar risks. The
remedy involves the creation of a panel of experts who are to review
Microsoft’s behavior and consider complaints from third parties. The
recommendations of the panel on these issues come to the court for
action. This has the potential to create continuing judicial review of a

      68.    Cf. id. at 407, 410–11.
      69.    Notable exceptions are JAFFE & LERNER, supra note 66, and Lemley,
supra note 66.
      70.    In re Borden, Inc. (ReaLemon), 92 F.T.C. 669 (1978).
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wide range of business decisions. So far it is not apparent how intrusive
these reviews will be, but the fact that Microsoft agreed to the process
suggests that it did not foresee them creating serious obstacles to its
ongoing business plans.71
     The concern with intrusive regulation of corporate business
decisions would appear to have some validity. However, a central
question is whether such regulatory remedies are a common element of
most monopoly-conduct cases. The more usual challenge is to a
business practice that can be forbidden without requiring extensive
oversight of the full range of business decisions within that enterprise.
Indeed, as the United States Court of Appeals for the Ninth Circuit
demonstrated in the Kodak case, it is possible to impose a limit on
exclusionary conduct (e.g., denial of access to repair parts) without
entering into price regulation by the simple expedient of requiring equal
treatment of all buyers.72

     C. The False Premises behind the Concern with False Positives

      Putting to one side the cynical suggestion that the concerns with
false positives are advanced simply to protect allies without regard to
the merits or consistency of the positions taken, it is possible to
postulate the premises on which such positions would rest. There are
two primary premises that rest on a third premise about remedy. First,
antitrust cases are too complex for judges, so the judges err a
significant part of the time by making false-positive decisions.73
Second, these errors result in substantial social costs because antitrust
law is a very powerful and effective instrument in restricting efficient
economic behavior.74 Third, the natural order to the economy reflected
by the current structure of markets means that any restructuring of
monopoly markets to eliminate monopoly power would result in
substantial inefficiency.75 The implication of these three premises is that
decision makers should be deeply concerned with the risk of false
positives; reluctant to impose any significant constraints on market
behavior by dominant firms; and seek rarely, if ever, the dissolution of
dominant firms. Indeed, if these premises were correct, they would

      71.   United States v. Microsoft Corp., 231 F. Supp. 2d 144 (D.C. Cir. 2002)
      72.   Image Technical Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195,
1224–28 (9th Cir. 1997) (price-regulation issue).
      73.   Frank H. Easterbrook, The Limits of Antitrust, 63 TEX. L. REV. 1 (1984).
      74.   Arthur, supra note 45.
      75.   Easterbrook, supra note 73, at 39; Arthur, supra note 45, at 5.
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constitute a basis to reject any but the most limited interventions in the
     The three propositions reflect a kind of deterministic view of
economic organization similar to Marxist conceptions. As a result, they
suffer from the same failure as Marxism to appreciate the many roads
that exist within any real economic system to achieve efficiency and
progress. In a nondeterministic world, each of the three premises is
highly questionable as the following critical review demonstrates.

                             1. PROPOSITION ONE:

      The proposition asserts that courts not only err frequently in
antitrust cases but that those errors tend to be false positives. Why
courts should err primarily in this direction is not explained. If
anything, scholars would predict that courts, as conservative
institutions, would be more likely to provide false-negative decisions.
      “Proof” of the premise of false positives rests largely on
hypotheticals based on some plausible economic theories. The analysis
takes the form of offering an alternative, efficiency-based explanation
for the conduct condemned in leading cases. The proof of error in the
decision consists, first, of the demonstration that under some
assumptions the alternative explanation could explain the conduct.
Second, the analysis often offers a narrow anticompetitive explanation
for the conduct, usually on the basis of the court’s language. The
narrow anticompetitive explanation is then disproved by claims derived
from economic theory. The refutation of the anticompetitive
explanation is said to prove that the alternative efficiency explanation is
the only possible one, thereby demonstrating that a false-positive
decision has occurred. The weaknesses with this method are many.76 A
central difficulty is that such analyses fail to consider the actual facts of
the cases and whether those facts were consistent with an
anticompetitive conclusion even if it was different from the way the
court framed the issues.
      Monsanto v. Spray-Rite Service Corp.77 and United States v.
Topco Associates, Inc.78 provide good examples. Both cases are

     76.     See Peter C. Carstensen & Bette Roth, The Per Se Legality of Some
Naked Restraints: A [Re]conceptualization of the Antitrust Analysis of Cartelistic
Organizations, 45 ANTITRUST BULL. 349 (2000) (discussing further the weaknesses with
this approach to social science).
      77.    465 U.S. 752 (1984).
      78.    405 U.S. 596 (1972).
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strongly criticized as examples of false positives that condemned
efficiency-enhancing conduct. Topco’s restriction on its members’
resale locations (i.e., exclusion of competition) is understood to have
been an efficient way to deal with free-riding risks that would arise
from new entrants being able to take advantage of the prior promotion
of the Topco house brand. Similarly, in Monsanto, the assumption is
that distributors of Monsanto’s herbicides were engaging in complex
and costly selling activities that were vulnerable to free riding. Hence,
Monsanto needed to exclude Spray-Rite—a price cutter—because it
must have failed to provide necessary services.
      Neither free-riding story has any merit. Monsanto itself
specifically disclaimed the free-rider argument and sought to excuse its
actions as being unilateral.79 This was a rational litigation strategy
because Spray-Rite’s counsel had built a record showing that there had
been no complaints about its services.80 Moreover, customers of
herbicides (i.e., farmers) are repeat players whose needs for
information and other services will continue from year to year.81
Because the need for services is continuous, there is little or no risk of
free riding by buyers. The distributor who is victimized once will not
provide valuable services in the future. The buyer, having betrayed its
former distributor for a one-time discount, will have to rely on its new
supplier to provide needed services in the future. But, in fact, farmers
do not rely primarily on the sellers of herbicides for advice or other
presale service. They use the agricultural-extension agents provided by
the states who offer better and more neutral information and related
services.82 These facts suggest that some other, anticompetitive purpose
must have motivated the elimination of an efficient, price-competitive
distributor.83 Despite this readily available information, some
stubbornly cling to their perceptions that Monsanto illustrates a false

      79.      See Monsanto, 465 U.S. at 757.
      80.      Id. at 767.
      81.   Steven P. Schneider, Comment, A Functional Rule-of-Reason Analysis
for Resale Price Maintenance and Its Application to Spray-Rite v. Monsanto, 1984
WIS. L. REV. 1205, 1262–63 (1984).
       82.   Id. at 1265–66.
       83.   Id. at 1268–69 (suggesting that Monsanto wanted to entrench its market
position after its patent expired and so promoted a distributor cartel so that the
distributors would have less incentive to promote generic products after the patent
expired, even though having Spray-Rite as a vigorous price competitor seriously
undermined this cartel); see also Peter C. Carstensen, The Competitive Dynamics of
Distribution Restraints: The Efficiency Hypothesis versus the Rent-Seeking, Strategic
Alternatives, 69 ANTITRUST L.J. 569, 604 (2001); cf. JTC Petroleum Co. v. Piasa
Motor Fuels, Inc., 190 F.3d 775, 777–78 (7th Cir. 1999) (two-level cartel explained as
a rational strategy to control prices in the highway-paving market).
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     Topco provides a second striking example of the same kind of
myth-making. Topco members had total combined sales that were five
to ten times larger than necessary to achieve efficient scale for
acquiring house brands.84 Moreover, house brands should be good-
quality, cost-effective products, but grocery stores do not spend money
to advertise their house brands. The potential, therefore, that a grocery
store obtaining Topco products could achieve any significant
competitive advantage over its rivals is doubtful even in theory. In fact,
despite the absolute condemnation of the territorial restraints in its
opinion, the Supreme Court subsequently upheld, by an eight–one vote,
a decree that allowed Topco to continue to restrict competition among
its members provided it could demonstrate that there was an actual need
to do so.85 For the ten-year life of that decree, Topco never once sought
to impose any restraint on its members, many of whom came to
compete with each other.86 Today, Topco remains a major distributor of
house brands whose members frequently compete with each other.87
Thus, the free-riding hypothesis was and is totally false as a matter of
fact with respect to Topco. Therefore, the decision is not an example of
a false positive despite the myths that scholars and casebook editors
     Further, there is good basis to believe that the Court’s decisions in
the 1960s and early 1970s concerning distribution restraints, often
pictured as false positives, had more rationality than critics were
prepared to accept.89 Although United States v. Arnold, Schwinn &
Co.90 is usually described as imposing a per se prohibition on territorial
allocations, the Court in fact permitted Schwinn to retain significant
control over its distribution system provided it did not pass title to the
intermediate distributors who were otherwise its agents acting as
independent contractors.91 Thus, the Schwinn decision created no
insurmountable barriers to efficient distribution.92 Finally, contrary to

      84.    United States v. Topco Assocs., Inc., 405 U.S. 596, 614 n.1 (1972)
(Burger, C.J., dissenting).
      85.    See United States v. Topco Assocs., Inc., 414 U.S. 801 (1973).
      86.    Willard F. Mueller, The Sealy Restraints: Restrictions on Free Riding or
Output?, 1989 WIS. L. REV. 1255, 1268–69 n.74.
      87.    See Topco, (last visited Feb. 25, 2008).
      88.    See generally Peter C. Carstensen & Harry First, Rambling Through
Economic Theory: Topco’s Closer Look, in ANTITRUST STORIES 171 (Eleanor M. Fox
& Daniel A. Crane eds., 2007) (discussing Topco in detail).
      89.    See Carstensen, supra note 83.
      90.    388 U.S. 365 (1967).
      91.    Id.; see Carstensen, supra note 54, 826–31 (discussing the ambiguous
functional analysis in the Schwinn case).
      92.    See Robert C. Keck, The Schwinn Case, 23 BUS. LAW. 669 (1968).
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popular impression, in seeking to reverse Schwinn, Sylvania did not
offer a free-riding defense for its restraints, although, ironically, the
plaintiff did.93 It only claimed to lack market power in the market for
television sets.94 Of course, if that statement were true, its restraints
would have been meaningless for either efficiency-enhancing or
anticompetitive purposes. The Supreme Court, perhaps responding to
compelling arguments from the briefs of the amici, failed to observe
that the defendant’s own evidence did not support a free-riding claim.95
Thus, Sylvania is as likely to be a false negative as a false positive.96
     Ironically, conventional antitrust scholarship regards the Board of
Trade v. United States 97 decision as the leading example of a false
negative, that is, a decision permitting an unjustified restraint of trade.
That case involved an absolute restraint on price competition among
members of the exchange in bidding to rural elevators for grain to be
received at the exchange after the close of the exchange. A detailed
analysis of the record and underlying historical materials shows that the
restraints were in fact ancillary to the function of the exchange as a
joint venture and specifically aimed at serious problems of free riding
and opportunistic conduct.98 Hence, the decision upholding the price
restraints was in fact correct.
     Other examples of false negatives include Paschall v. Kansas City
Star Co.99 and NicSand, Inc. v. 3M Co.100 In Paschall, the newspaper
refused to sell papers to independent delivery services and insisted that
they become agents of the paper so that the paper could control both
price and delivery services. Many antitrust scholars believe that this

       93.   Peter C. Carstensen, Annual Survey of Antitrust Developments 1976–
1977, 35 WASH. & LEE L. REV. 1, 19–21 (1978).
       94.   Id. at 19–20.
       95.   Id. at 24 n.139.
       96.   The same is true for Business Electronics Corp. v. Sharp Electronics
Corp., 485 U.S. 717 (1988), where the explanation for eliminating competition among
retailers might well be similar to that postulated in the Monsanto case. See supra note
83. Other cases are just irrational, such as State Oil Co. v. Khan, 522 U.S. 3 (1997),
which rests on an assumption of myopic bilateral monopoly pricing in the context of
retail gasoline markets without a shred of evidence to support such a theory. See Peter
Carstensen & David Hart, Khaning the Court: How the Antitrust Establishment
Obtained an Advisory Opinion Legalizing “Maximum” Price Fixing, 34 U. TOL. L.
REV. 241 (2003). However, in that case, dismissing the antitrust claims may not have
been wrong.
       97.    246 U.S. 231 (1918).
       98.    See Peter C. Carstensen, The Content of the Hollow Core of Antitrust:
The Chicago Board of Trade Case and the Meaning of the “Rule of Reason” in
Restraint of Trade Analysis, in 15 RESEARCH IN LAW AND ECONOMICS 1 (Richard O.
Zerbe Jr. & Victor P. Goldberg eds., 1992).
       99.    727 F.2d 692 (8th Cir. 1984) (en banc).
       100. 507 F.3d 442 (6th Cir. 2007).
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kind of vertical integration is economically efficient because it
eliminates a bilateral monopoly (e.g., monopoly paper and monopoly
distributor) in which, if the two monopolists are myopic, the predicted
result is that prices will exceed the optimal monopoly level with a
consequent excessive reduction in output. The record in the Paschall
case showed, however, that after the integration, more than 90 percent
of the subscribers would have the same or higher prices and reduced
services.101 This evidence established that, in fact, the bilateral
monopoly was producing lower prices and greater output than an
integrated monopolist, thus serving the ultimate interest of consumers.
The majority nevertheless sided with the newspaper in its effort to
claim its “full monopoly profit.”102 Indeed, the majority characterized
the retailers as “robbing” the Star Company of its rightful monopoly
profit.103 This is a classic case of a false-negative analysis. It empowers
dominant, upstream firms to take control of their downstream
distributors solely to achieve greater market exploitation.
      The United States Court of Appeals for the Sixth Circuit, sitting en
banc, upheld the dismissal of NicSand’s complaint against 3M that had
charged 3M with exclusionary conduct resulting in monopolization of
the specialized market for abrasives used by do-it-yourselfers for car
repairs.104 The allegations were that 3M had made very large upfront
payments to the five or six key retailers of this product line in order to
obtain multiyear exclusive-dealing contracts.105 The upfront payments
were allegedly equal to or greater than the expected profits from the
first year or more of sales.106 The effect on NicSand—a small,
specialized manufacturer107—was to drive it from the market entirely
and into bankruptcy.108 While one-year exclusive deals were the
industry norm and included the buyout of the inventory of the producer
being replaced, the allegations in the case were that 3M used its deep
pockets to raise the amount of the upfront payment and extend the
duration of exclusivity without any business justification except
foreclosing competition.109 In combination, this created an insuperable

      101. Paschall, 695 F.2d 322, 330 (8th Cir. 1982), aff’d en banc, 727 F.2d 692
(8th Cir. 1984).
      102. Paschall, 727 F.2d at 703.
      103. Id.
      104. NicSand, 507 F.3d at 449, 459.
      105. Id. at 447–49.
      106. Id. at 453.
      107. NicSand is an Ohio corporation, started in 1982, that produces a variety of
products for automotive-body repair. Of these products, automotive-sandpaper sales
accounted for half of the company’s total revenue in 1996. Id. at 447.
      108. Id. at 448–49.
      109. Id. at 448, 452–53.
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barrier to small competitors with limited financial resources, such as
NicSand, and effectively foreclosed the market for future entry because
of limited opportunity for efficient entry resulting from the long
duration of the exclusive-dealing commitments of the major buyers.110
The majority, however, concluded that NicSand had not suffered
antitrust injury as a result of 3M’s actions.111 This decision therefore
authorizes deep-pocket competitors to engage in comparable practices
where there is no explanation for the conduct other than exclusion. This
is another example of a false-positive decision that expands the arsenal
of dominant firms in their ongoing efforts to exclude smaller
      In sum, courts can and do make mistakes, but despite the complex
nature of antitrust litigation, there is no reason to think that they have
any special proclivity to err on the side of intervention (i.e., false
positives) in such cases. In fact, given the inherently conservative
nature of even the most progressive judges, there is a strong bias
against finding problems even if the evidence might support such a

                     2. PROPOSITION TWO:

      The fear of false positives in antitrust requires more than the
existence of mistakes. The mistakes must have consequences. One
consequence is the cost of litigation itself. If the results are often
wrong, then the costs are unnecessary. Antitrust litigation is no more or
less a source of concern in this area than is other complex and risky
corporate litigation. The risk-averse firm wanting to avoid litigation
costs will have an incentive to avoid the conduct that creates the risk of
litigation. This deterrent effect is a plausible basis for concern only if
the specific conduct foreclosed constitutes the only way to achieve an
efficient and desirable business objective. Hence, the analysis must
focus on the implications of foreclosing specific conduct options and
cannot rely simply on the fact that risk-averse businesses will seek to
avoid such options. Thus, the primary cost of error resides in the
impact on future conduct.
      If an actor with monopoly power is denied the opportunity to
engage in efficient production or distribution, then overall consumer
welfare will suffer. This harm necessarily assumes that the prohibited
conduct is the only practical way to achieve a desirable goal. If the
same results can be achieved in other lawful ways, then there is no

      110.     Id. at 451; id. at 461–62 (Martin, J., dissenting).
      111.     Id. at 459.
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long-run harm to the economic order. The central empirical question
then becomes whether there is only one way to achieve economic
efficiency. Two lines of analysis deserve consideration.
      First, it is useful to ask whether, in general, there is any basis to
believe that there are specific methods of doing business that are
inherently more efficient than all other options. The focus is not on
basic units of production but rather on the ways in which a dominant
firm controls access to inputs or outputs. Hence, the issue is often
distribution tactics—the use of exclusive dealing, bundling, pricing, and
other specific aspects of marketing or input purchase that have the
effect of foreclosing competitors. In such contexts, the question for
evaluation has to be narrowly framed to focus on the connection of the
specific exclusionary conduct to the efficiency-enhancing objective.
How necessary is that conduct to the underlying goal? In a Coasian
world, it would be obvious that there would be a wide range of ways
that either contract or ownership integration could achieve some
specific goal. There would be little or no need to introduce any
exclusionary feature except those that inhere in the primary transaction.
      In a real world of transaction costs and opportunistic behavior,
there may be legitimate concerns about loyalty and responsiveness to
the underlying efficiency-enhancing goal. But this does not justify the
use of exclusionary conduct. Such conduct seeks to address a problem
akin to an externality—an incentive to act contrary to the agreement.
Once the efficiency-enhancing activity is identified, the risks of
opportunistic behavior can be identified. At this point, the monopolist,
like any other buyer or seller, can reframe the transaction to reduce or
eliminate the risk of opportunistic conduct.112 Basically, exclusionary
restraints are one tool, and usually a weak one, when major efficiency
gains are possible but vulnerable to strategic misconduct. Indeed,
whenever the gain is significant but vulnerable under existing
relationships, it is very likely that the most efficient solution (i.e.,
lowest policing costs) is to reframe the transaction or activity to

      112. An illustration comes from United States v. Sealy, Inc., 388 U.S. 350
(1967). In Sealy, in order to ensure the success of a joint venture, producing a
differentiated brand of mattress advertising was important. The risk of free riding in
this scenario is obvious—let another member support advertising and then take a free
ride on that effort by selling to that member’s customers. Hence, Sealy could have used
a territorial limitation and a contractual requirement for advertising. In fact, Sealy
imposed a per-mattress charge on all its participants that went to the central
headquarters for use to reimburse actual advertising expenses, whether incurred by a
participating manufacturer or by a retailer. This strategy eliminated the risk of free
riding on advertising and avoided the potentially intractable problems of policing each
member’s direct- and indirect-advertising efforts. Mueller, supra note 86, at 1265,
1280, 1300–01; see also Carstensen, supra note 83, at 607–08.
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internalize the benefits to the parties in ways that do not facilitate
strategic conduct.
      As a generalization, it should be possible for well-counseled
monopolists to determine where they risk opportunistic behavior and
find ways to internalize that risk by reconceptualizing the transaction.
Unfortunately, this capacity also can be used to secure monopoly
profits that might otherwise elude the firm. Hence, the competitive
analysis should focus on why the activity was reordered. Was it to
avoid opportunistic conduct that might interfere with legitimate business
objectives (e.g., efficient production or distribution) or was it to
capture more of the consumer surplus that might otherwise be lost to
the monopolist because the existing system of production or distribution
did not capture the monopoly profits as fully as the alternative? Thus,
the general conclusion is that there are likely to be many ways to
accomplish an efficiency-enhancing improvement in the production or
distribution of goods and services. Given that monopoly is socially
inefficient and undesirable but can be durable if allowed to protect itself
from entry and competition, any exclusionary conduct should be subject
to strict scrutiny to determine whether the exclusionary effects were
      Second, the cases themselves identify the kinds of conduct that are
of concern in terms of competitive effect, and the efficiency-enhancing
qualities of that conduct can then be evaluated. In looking at the run of
cases involving exclusionary, monopolistic behavior, it is hard to see
that any desirable goals were obstructed at all. In Aspen, for example,
there was no reason why Aspen Ski Co. could not have sold day
tickets.113 If it had done so, consumers would have been free to make
choices on the basis of their preferences, and Aspen Ski Co. would not
have had to collaborate with Aspen Highlands further.114 Similarly, 3M
could have discounted specific products in its line rather than bundling
them into a package.115 Nothing in U.S. Tobacco’s behavior toward
Conwood seems important to efficient distribution of chewing
tobacco.116 Kodak remained free to set any price it wanted for its repair
parts, both patented and unpatented, so long as it made them available
to all buyers.117 Finally, Dentsply’s “justification [for its restraints on
its dealers’ sale of competing products] was pretextual and did not

      113. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 608–
10 (1985).
      114. Id.
      115. LePage’s Inc. v. 3M, 324 F.3d 141, 163–64 (3d Cir. 2003) (en banc).
      116. Conwood Co. v. U.S. Tobacco Co., 290 F.3d 768, 788 (6th Cir. 2002).
      117. Image Technical Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195,
1224–28 (9th Cir. 1997).
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excuse its exclusionary practices.”118 In short, the conduct interdicted in
the cases has little to do with general efficient behavior. Moreover, the
commands leave a great deal of discretion to the firms to find other
ways to compete in the market.
     Competent counsel can read such decisions and render good advice
to clients with substantial market positions regarding the kinds of
practices that will be likely to raise serious antitrust concerns. Indeed,
counsel do this all the time. Given the motives of dominant firms to
exclude and entrench their position in the market, the burden on
counsel is to balance such urges with the legitimate needs of production
and distribution.

                      3. PROPOSITION THREE:

     Assuming a concern for the harms resulting from monopoly and a
belief that conduct-oriented interventions carry serious efficiency costs
might lead to a policy that monopoly itself should be eliminated.
Indeed, monopoly law originally took exactly that position. In the
Standard Oil case, the Supreme Court was explicit:

      [T]he duty to enforce the statute requires the application of
      broader and more controlling remedies. . . . [These remedies
      will] neutralize the extension and continually operating force
      which the possession of the power unlawfully obtained has
      brought and will continue to bring about.119

     The folklore is that structural remedies for monopoly have had
undesirable results. While some corporate dissolutions were not
optimal, it is hard to claim that the oil, cans, aluminum, copier, or
telecommunications industries were made worse off as a result of
remedies that had the effect of dissipating market power and
encouraging the emergence of competition.
     Not all monopoly-dissipating remedies required corporate
dissolution to achieve that goal. In copiers, Xerox divested control over
the patents controlling the competing technology, which encouraged
large-scale entry and rapid transformation of the industry.120 Similarly,
in the case of tin cans, the successful remedy involved the divestiture of

      118.     United States v. Dentsply Int’l, Inc., 399 F.3d 181, 197 (3d Cir. 2005).
      119.     Standard Oil Co. of N.J. v. United States, 221 U.S. 1, 77–78 (1911).
      120.     Tom, supra note 63, at 967.
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patented can-closing machines that opened the market for cans to all
     Corporate reorganizations have also proven successful in some
very important cases. In aluminum, the primary remedy was to separate
ownership of two of the major North American aluminum producers,
Alcoa and Aluminum Limited of Canada.122 The result was a major
increase in competition in that market. The long-run impact of the
dissolution of Standard Oil was to stimulate the growth of competition
in that industry. Similarly, the dissolution of AT&T has contributed to
the rapid growth of technological innovation in telecommunications—a
direct result of competition. In these cases, the monopoly enterprise
was so constituted that a major corporate reorganization was feasible.123
     In general, in an economy on the scale of the United States, it is
very rarely the case that productive or distribution economies would
warrant a single dominant firm as a matter of efficiency. Most such
firms have acquired that position through merger and fortuitous market
events. Restructuring such firms does no violence to underlying
efficiency. On the other hand, Microsoft posed a real problem with
respect to identifying a way to dissipate monopoly power.124
     One of the many curious tensions within the legal world is the
belief that existing market structures are both natural and efficient and
the contrary belief that corporate acquisitions and takeovers are
desirable because they will move assets to a higher and better use. But
if corporate takeovers or buyouts are economically desirable, then no
given ownership pattern is inherently optimal. Indeed, the real business
world features a great deal of churning of assets. Firms acquire and
then divest assets. Wall Street investment bankers are equally capable
of both buying and selling enterprises. This behavior shows that the
business community is not discomforted by corporate death, marriage,
or divorce. Given the flexibility of the market to structure and
restructure corporate organizations, the law should not regard
dissolution of enterprises as the analog of the death penalty. Rather, it

      121. James W. McKie, The Decline of Monopoly in the Metal Container
Industry, 45 AM. ECON. REV. 499 (1955).
      122. United States v. Aluminum Co. of Am., 91 F. Supp. 333, 398, 418–19
(S.D.N.Y. 1950).
      123. With respect to the Standard Oil case, see Standard Oil, 211 U.S. at 77–
82 (discussing remedy involving divestiture of stock interests); in the case of Aloca, the
remedy decision is found at Aluminum Co., 91 F. Supp. 333 (D.N.Y. 1950) (ordering
shareholders in the defendant company to dispose of their stock in the defendant or in
Aluminum Company of Canada).
      124. See Peter C. Carstensen, Remedying the Microsoft Monopoly: Monopoly
Law, the Rights of Buyers, and the Enclosure Movement in Intellectual Property, 44
ANTITRUST BULL. 577, 580, 604–06, 608–10 (1999).
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is a tool of the business world and can be used to further public policy
just as it is used to further corporate ends.
      A few industries, such as gas or oil pipelines, electric transmission
and distribution, and, perhaps, cable television and land-line-based
telephone service may have inherently monopolistic structures.
Similarly, network systems may create a strong tendency toward
monopoly. The incentive to exploit this monopoly power arises from
the ownership of such monopolies. That is, a single owner has an
incentive to capture the potential rents from the monopoly position. The
lesson from essential-facilities situations is that other forms of
ownership can dissipate or eliminate the incentive to exploit that
monopoly.125 Specifically, if the ownership of the potential monopoly
bottleneck is dispersed among stakeholders who need to use the
monopoly to get inputs or reach consumers or rely on a network
platform to provide a market for individual products, then the collective
interest is in eliminating the bottleneck by expanding to serve all of the
demand that can pay the competitive price. Illustrations of this principle
appear in the United States v. Terminal R.R. Ass’n,126 the response of
farmers to local grain-elevator monopolies,127 and, most recently, in a
legislatively mandated restructuring of electric-transmission ownership
in Wisconsin.128
      Thus, while some intractable cases may exist, in general
dissipation of monopoly power by some structural remedy is a very
feasible option. It demands careful analysis and may result in disruption
of the market during transition periods. But if there were a serious
concern for the risks of false positives with respect to conduct-oriented
relief in monopoly cases, then, given that monopoly itself is
undesirable, it would seem that remedies that eliminated the monopoly

       125. An essential facility is one to which competitors require access in order to
compete in other, related markets. See generally Spencer Weber Waller, Areeda,
Epithets, and Essential Facilities, 2008 WIS. L. REV. 359. ____
       126. 224 U.S. 383, 397–98, 411 (1911) (forcing railroad-terminal association
to allow all railroads to become shareholders and thus eliminating the incentives to
discriminate or exploit).
       127. See Carstensen, supra note 98, at 29 (describing how cooperative
elevators were larger than those in private ownership because the owners, farmers
seeking to market their grain, had no incentive to try to exploit themselves by limiting
       128. The Wisconsin legislature required all transmission assets to be sold to a
single operating company and allowed downstream buyers of electricity to invest in the
company so that all stakeholders were able to participate. See WIS. STAT. §
196.485(1m)(b), (3)(c), (3m)(c)(3) (2005–06). The resulting enterprise has much more
incentive to eliminate congestion in the system and ensure open access to all buyers and
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power and left business free to compete as it wished should be
preferable to continued monopolistic inefficiency.

                       D. The Danger of False Negatives

     A false negative is a decision that fails to find a violation where the
conduct unreasonably and unnecessarily excludes either new or existing
competition. Such a decision operationally is one that finds certain
kinds of conduct to be lawful despite unjustified exclusionary effect.
The cause for concern is that once the legal system has blessed an
unjustified exclusionary practice, this may have great negative impact
both in the specific industry and the general economy because such a
ruling will empower other dominant firms to adopt the same strategy.
Thus the error will replicate itself as the initial decision becomes
precedent for rejecting challenges to similar conduct.
     A false negative is more likely to have significant, durable
economic effect than a false positive. The difference in predicted
outcome is that in the case of false positives, the actual goal of the
conduct is to accomplish something other than an adverse effect on
competition; hence the actor has, as discussed earlier, other ways to
achieve the same substantively efficient goal. In the case of a false
negative, the objective of the conduct at issue is to harm competition;
hence approval of such conduct means that the dominant firm and its
peers now have an additional weapon in their arsenal to achieve
exclusion. This directly increases the probability that unnecessary
exclusion will occur, entrenching the dominance of the market leader
and prolonging its exploitation of consumers.
     This is not a claim that in specific contexts the victims of
exclusionary conduct upheld via a false-negative decision cannot find a
way around that conduct. Clearly, the dynamics of the market,
including strategic interests of either customers or suppliers, can make
it possible to evade the impact of an exclusionary practice. Rather, the
claim here is probabilistic: the more the courts uphold such unjustified,
exclusionary practices, the more likely it is that exclusion will be
successful in both the short and intermediate run. Moreover, as such
conduct becomes insulated from legal challenge, investors and bankers
will be less willing to take the risks associated with entry into these

                E. The Falsification of the False-Positive Mantra

     To sum up this discussion, four central points can be made. First,
monopoly is inherently suspect in a market economy. This is
particularly true of monopoly that engages in self-protective,
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exclusionary conduct. Second, the interest of the monopolist in
exclusion and the conservative nature of the judicial process in
reviewing such conduct combine to create a more serious risk of false
negatives than of false positives. Third, the risk to longer-term
economic efficiency resulting from false positives in the context of
exclusionary, monopolistic conduct is low because of the existence of
multiple ways to achieve important economic efficiencies. But, fourth,
false negatives are more likely to result in durable costs to both static
and dynamic efficiency because of the incentive structure of
monopolists and the inherent conservatism, reflected in stare decisis, of
the judiciary.

                         FUTURE OF MONOPOLY LAW

     It is time to tie together the themes that underlie this Paper. First,
a survey of the current law of monopolistic exclusion shows that the
courts have fashioned from Aspen and Kodak standards for judging
such conduct that run few risks of false positives but may also limit the
danger of egregious false negatives. The question for the future is the
extent to which the Trinko decision, with its renewed concern for
maximizing monopoly profits and fear of false positives, will
undermine this trend. Second, if monopoly is not itself desirable, but if
conduct-oriented remedies have a high risk of false-positive outcomes
that also threaten economic efficiency, perhaps it is worth reconsidering
the merits of an alternative response to unlawful monopoly: structural

                     A. The State of the Law and Its Prospects

      Aspen establishes a standard for protecting competition and the
potential for competition oriented toward consumer choice and ensuring
its protection in the context of monopoly behavior.129 The screen it
creates focused on the business justification for the conduct outside the
monopoly itself. This test should have led in Paschall to the rejection of
the Star Company’s elimination of its distributors since the record
showed that the Star Company’s only objective was to increase its own
monopoly profits. Similarly, the claims of NicSand should have
proceeded because, again, the allegations were that the specific actions
sought only to create and entrench a monopoly. Aspen imposes a more
critical review of the economic rationality of specific conduct, but its

      129.     Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605–
10 (1985).
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test is respectful of the right of the monopolist to exclude
competition.130 Indeed, despite a passing reference to the potential that
less restrictive alternatives are relevant,131 the opinion’s factual analysis
emphasized “Ski Co.’s failure to offer any efficiency justification
whatever for its pattern of conduct.”132 As such, it is comparable to the
original standard for judging the legality of a restraint of trade that
excluded from the application of section 1 of the Sherman Act any
restraint ancillary to some legitimate transaction or joint venture.133
      The Supreme Court carried this analysis forward in the Kodak case
when it again examined the justifications for exclusionary conduct
critically but without any final resolution.134 The Kodak standard is also
ambiguous because of the role of patent rights as a possible justification
for exclusionary conduct. Patent law expressly confers a right to
exclude others from the production or use of the patented good or
process. However, if the exclusion advances an economic interest of
the patent holder other than the direct exploitation of the patent
privilege itself, it is subject to challenge.135 The Ninth Circuit’s solution
to the question of balancing these rights is not very satisfactory.136 A
better explanation for the decision’s pretextual standard is to consider
the role and function of the discriminatory refusal. Where a significant
effect is to preclude competition in related but unpatented markets, then
the refusal to deal should be outside patent law and subject to antitrust

      130. Id. at 600.
      131. Id. at 605 (considering as relevant whether the monopolist has “impaired
competition in an unnecessarily restrictive way”).
      132. Id. at 608.
      133. Despite many misreadings of United States v. Trans-Missouri Freight
Ass’n, 166 U.S. 290 (1897), and United States v. Joint Traffic Ass’n, 171 U.S. 505
(1898), Justice Peckham was clear in both cases that the absolute reading of section 1
applied only to naked restraints of competition. The decisions in Anderson v. United
States, 171 U.S. 604 (1898), and Hopkins v. United States, 171 U.S. 578 (1898),
decided the same day as Joint Traffic confirm this. See also Nolen Ezra Clark,
Antitrust Comes Full Circle: The Return to the Cartelization Standard, 38 VAND. L.
REV. 1125 (1985).
      134. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451
      135. Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S.
172, 175 (1965); Int’l Salt Co. v. United States, 332 U.S. 392, 395–96 (1947); United
States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam).
      136. See Image Technical Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195
(9th Cir. 1997). But see In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1329
(Fed. Cir. 2000) (criticizing the Ninth Circuit’s approach).
      137. See Seungwoo Son, Selective Refusals to Sell Patented Goods: The
Relationship between Patent Rights and Antitrust Law, 2002 U. ILL. J.L. TECH. &
POL’Y 109.
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      Despite the questionable phrasing by the Ninth Circuit of its
standard on remand, the thrust of the Supreme Court’s Kodak decision
is that exclusionary use of monopoly power should be reviewed
critically. Because of the posture of the case, the Court’s critical
analysis focused only on the question of whether any of the
justifications that Kodak offered were so indisputable that they
warranted dismissing the plaintiff’s case on summary judgment. 138
      The courts of appeals have drawn on Aspen and Kodak to develop
a somewhat-more-critical stance for reviewing exclusionary conduct.
The key cases are Microsoft, 3M, Conwood, and Dentsply.
      Microsoft propounds a set of criteria for judging the lawfulness of
harmful conduct by a monopolist that makes clearer and more concrete
the Aspen methodology and appears also to impose a somewhat-more-
restrictive test for conduct having mixed outcomes.139 The Court
adopted a four-step approach to evaluating conduct: First, the plaintiff
must establish that the conduct at issue had an adverse effect on
competition in general, both as a matter of theory and fact. Second, if
the plaintiff has satisfied step one, the defendant must advance a
nonmonopolistic business justification for the conduct, but such a
justification can include protection of legitimate intellectual-property
rights.140 Third, if the defendant satisfies step two, the plaintiff has the
burden of proving that the justification is pretextual or that there is a
less restrictive means to accomplish the legitimate goal.141 Fourth, even
if the defendant prevails in step three, the decision maker is to weigh
the social gain from the harmful conduct against its competitive costs
and may find it unlawful despite there being no less restrictive option
that would be equally effective to accomplish the legitimate business
      The first two steps seem consistent with Aspen. Step three follows
from the initial statement of the rule of the appropriate standard in
Aspen although the decision’s factual analysis emphasized the lack of
any business justification. Step four imposes stricter standards than
Aspen might have suggested.
      In particular, while rejecting the monopolist’s justification on the
grounds that it is pretextual is consistent with Aspen, imposing a less-
restrictive-alternative standard results in stricter scrutiny of the conduct
of the monopolist than courts have heretofore employed. It is consistent

      138.  See Kodak, 504 U.S. 451.
      139.  Compare Microsoft, 253 F.3d at 58–59, with Aspen Skiing Co. v. Aspen
Highlands Skiing Corp., 472 U.S. 585, 610–11 (1985).
     140. Microsoft, 253 F.3d at 58–59.
     141. Id. at 59.
     142. See id.
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with the analysis suggested in Part II of this Paper that monopolists
have a clear strategic incentive to impose the maximum exclusionary
restraint consistent with their legitimate business goal.143 The United
States Court of Appeals for the District of Columbia Circuit’s standard
would address this tendency but at the cost of more intrusion into
business decisions.
      Finally, step four, with its authorization of balancing harms and
benefits without an explicit standard for striking that balance, is the
most problematic. Such a step invites the greatest risk of false
outcomes—positive or negative. It is worth noting that in applying this
framework, the D.C. Circuit never got past step two. It either found
that there was no justification for the exclusionary conduct or that the
justification was not disputed on its merits. Hence, it remains to be seen
whether and how the final two steps of the framework will apply in
      Conwood was, given the facts found by the trial court, an easy
case of unlawful, predatory, and exclusionary conduct.144 This conduct
included destroying Conwood’s racks and sales materials, misleading
retailers about relative sales, and using exclusive contracts to reduce the
availability of Conwood’s product.145 Given the facts, the number and
vigorousness of objections to the decision signal the continued concern
for false positives in the bar and the academic community. But on the
basis of the record in the case as described by the court of appeals, any
other outcome would have been a false negative.
      LePage’s may appear to be a more difficult case because it
involved the use of bundled sales with discounts.146 Such practices are
part of the general commercial-business world. Hence, the ruling has a
broader implication than that of Conwood. The critics can say that the
United States Court of Appeals for the Third Circuit’s standard for
deciding whether bundling was unlawful did not provide much guidance
to firms with large market shares in some specific product line.
However, this exaggerates the potential uncertainty. Sellers are on
notice that when a discounted bundle combines a set of product lines for
which no competitor can offer a competing bundle, there is going to be
an exclusionary effect. The seller can then identify its business reason
for needing to make such bundled sales and ask whether it needs to use
that approach to accomplish its legitimate, nonexclusionary goal.
Consultation with counsel when initiating such a bundled sale strategy
will allow risk-averse businesses to identify their legitimate reasons for

      143.     See supra Part II.
      144.     Conwood Co. v. U.S. Tobacco Co., 290 F.3d 768, 783 (6th Cir. 2002).
      145.     Id.
      146.     LePage’s Inc. v. 3M, 324 F.3d 141, 154–59 (3d Cir. 2003) (en banc).
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the strategy and consider less harmful alternatives. In short, the
LePage’s standard, as amorphous as it may be, creates little downside
risk to consumer welfare or longer-term efficiency.
      Indeed, the Third Circuit applied its LePage’s analysis to reverse
the trial court’s dismissal of the government case against Dentsply.147
Dentsply, the monopolist of artificial teeth, threatened to cut off its
dealers, the primary source of supply for the dental laboratories, if they
carried any teeth made by its competitors.148 Even the trial court had
found that the exclusionary conditions lacked any business
justification.149 The opinion on appeal concurred and reached the
obvious conclusion that such conduct should be unlawful
      Taken as a group, these four decisions reinforce the Aspen
approach and reflect a more balanced concern for mistakes in antitrust
law. To be sure, Conwood, LePage’s, and Microsoft were all decided
prior to Trinko, but the Supreme Court refused to review LePage’s,
one of the most controversial of these cases, when certiorari was sought
after the Trinko decision.151 Moreover, the Third Circuit upheld the
government’s challenge to Dentsply’s exclusionary conduct after
Trinko, without even citing that decision.
      Nevertheless, the Trinko decision renews the concern for false
positives and the disruptive effects of intervention in the decisions of
monopolists as to how they will treat competitors.152 Under Aspen and
Kodak, Verizon could only defend its conduct with proof that its failure
to serve its customer/competitor had a business justification other than
exclusion.153 Given the public record with respect to these actions, such
a defense was implausible.154 The conduct violated both contractual
rights of its customer and the statutory obligations imposed on the
company. In upholding the lawfulness of Verizon’s conduct as a matter
of antitrust law, the Court focused on the risks of cabining a monopolist
within the mildly restrictive rules of Aspen and Kodak and concluded
that such limits would result in serious risk of harm to economic
efficiency, including loss of innovation. This view assumes the validity

      147. United States v. Dentsply Int’l, Inc., 399 F.3d 181, 186–87, 197 (3d Cir.
      148. Id. at 185.
      149. Id. at 185.
      150. Id. at 196–97.
      151. 3M Co. v. LePage’s, Inc., 542 U.S. 953 (2004) (denying petition for writ
of certiorari).
      152. Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540
U.S. 398, 407–08 (2004).
      153. See supra notes 25–35 and accompanying text.
      154. Trinko, 540 U.S. at 402–05.
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of the proposition that false positives are inherently very harmful and
should be avoided at all costs.
     Worse, the Trinko opinion seems to accept on its merits the
position that antitrust law should protect the monopolist’s ability to
exploit its market power. Yet Verizon’s monopoly position arose from
the dissolution of another unlawful monopolist. Like the Kansas City
Star Company,155 Verizon has a corporate history tainted with unlawful
monopoly and a congressional determination that competition should be
brought to local-phone-service markets.156 If the Court’s decision is
taken literally, then the Court has abandoned Aspen’s constraints on the
use of monopoly power to exclude or destroy competition. The Court’s
subsequent refusal to review the LePage’s decision, however, argues
against such a broad reading.
     Trinko can be distinguished from Aspen and the cases following it
because of the unique context of an industry in transition from regulated
monopoly to one where Congress sought to create workable
competition.157 That is not, however, the flavor of the text of the
opinion. The reiterated concern for the efficiency costs of false
negatives, the implicit belief that courts are maladapted to decide the
merits of such claims, and Schumpeterian enthusiasm for the right to
exploit monopoly as an instrument of dynamic economics resonate
through the opinion without objection from the dissent.
     The future of monopoly law is much in doubt even as it becomes a
more significant issue in a world increasingly inhibited by dominant
firms and various forms of intellectual-property rights having
monopolistic character. Despite the paucity of actual false positives in
the real world, the myth of the highly inefficient false positive remains
a strong force in legal discourse. Moreover, as the uncritical version of
the Schumpeterian vision of monopoly as a good thing has emerged as
the basis for defending all monopolies, the concern for protecting the
right to full monopoly profits will strengthen the opposition to stricter
rules against exclusionary conduct even where the only defense is that it
increases monopoly profits.

      155. The Kansas City Star Company was convicted in the 1950s of criminal
violations of section 2. Kansas City Star Co. v. United States, 240 F.2d 643 (8th Cir.
      156. Trinko, 540 U.S. at 402–05.
      157. The decision can read as an expansive version of the primary-jurisdiction
concept. See, e.g., Ricci v. Chicago Mercantile Exch., 409 U.S. 289 (1973). The
concept called for allowing regulators having concurrent authority to deal with industry-
specific conduct before a court examined the conduct under the antitrust laws. Id. at
304–05. Trinko would expand this approach to impose a bar on damages for past harm
when the administrative agency has acted to eliminate the competitive concerns by
forward-looking enforcement.
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              B. What about a Structural Response to Monopoly?

     If the kinds of conduct-oriented remedies now popular in antitrust
were likely to stultify business and rigidify markets, courts might
consider alternatives that would respond to the problems of durable
monopoly without imposing restrictive rules on firms. Indeed, the
Standard Oil decision embraced exactly such a strategy for dealing with
monopoly. It did so because the risks to the dynamics of the market
from excessive judicial regulation outweighed the potential costs
involved in corporate reorganization.
     It may be time to revisit that Standard Oil approach. The basic
argument is that to avoid regulatory decrees, the market needs to be
restored to a workably competitive structure. In such a world, strategic,
exclusionary conduct is much less likely because it is unlikely to yield
significant gains for any firm. Thus, individual firms would not have to
be concerned about the legality of ordinary competition or its putative
exclusionary effect.
     By returning to structural remedies and limiting relief in monopoly
cases brought by victims of exclusionary conduct to structural reforms
of the market, the incentives to seek the kinds of inefficient conduct-
oriented relief that are most likely to produce false-positive results
would be eliminated. Firms would have to decide if they could survive
in a more competitive environment. The infamous Telex 158 and
Berkey 159 cases are examples of the pursuit of self-serving gain by firms
that would be unlikely to exist in a competitive market. Both cases in
fact produced significant evidence of exclusionary conduct as well as
monopoly power. But the plaintiffs in different ways both sought to
have the courts provide them with protection from the rigors of
competitive markets. This is a misuse of antitrust law and explains
why, ultimately, both cases entirely or largely failed. But prior to
reaching those results, the legal system laid the groundwork for false-
positive analyses of exclusionary conduct.
     It would unduly extend this Paper to engage in a detailed effort to
articulate the standards for structural monopoly based on the strength,
durability, and remediability of the monopoly situation. Suffice it here
to suggest that if there were a legitimate concern that conduct-oriented
decrees impose unreasonable risks to economic efficiency and desirable
market dynamics, then because monopoly itself is bad, it may be a
good idea to refocus monopoly law on its traditional mission of
eliminating monopoly and restoring workably competitive markets.

      158.     Telex Corp. v. Int’l Bus. Machs. Corp., 510 F.2d 894 (10th Cir. 1975).
      159.     Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979).
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      The present state of antitrust law is remarkable. Despite the
teaching of economic texts that monopoly imposes substantial efficiency
costs, a statute based on that insight (i.e., the Sherman Act), and a legal
history that shows the correctness of interventions that eliminate
monopoly and restore competition, the current case law seems to favor
the monopolist. Concern that courts might require a monopolist to find
a less harmful, but perhaps slightly more costly, way to accomplish a
legitimate objective is driving the law to embrace the vision that
monopolists should be free to seek the full monopoly profit regardless
of the manner in which they accomplish that goal. Moreover, if the
expansive reading of Trinko is correct, monopolists can defend their
conduct by expressly stating that they sought to increase monopoly
profits at the expense of actual or potential competitors. This would
reverse the more measured and balanced standards derived from Aspen
and would reflect a serious failure to appreciate the relevance and
implications of the economic models being deployed in these cases.

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