COMPETITION
AND
MONOPOLY:
SINGLE-FIRM CONDUCT UNDER
SECTION 2 OF THE SHERMAN ACT
U.S. Department of Justice
2008
COMPETITION AND MONOPOLY:
SINGLE-FIRM CONDUCT UNDER
SECTION 2 OF THE SHERMAN ACT
ISSUED BY THE
U.S. DEPARTMENT OF JUSTICE
SEPTEMBER 2008
This report should be cited as:
U.S. Dep't of Justice, Competition and Monopoly: Single-Firm Conduct
Under Section 2 of the Sherman Act (2008).
This report can be accessed electronically at:
www.usdoj.gov/atr/public/reports/236681.htm
Table of Contents
EXECUTIVE SUMMARY
INTRODUCTION
Chapter 1: SINGLE-FIRM CONDUCT AND SECTION 2 OF
THE SHERMAN ACT: AN OVERVIEW
- The Structure and Scope of Section 2
- Monopolization
- Attempted Monopolization
- The Purpose of Section 2 and Its Important Role in Sound Antitrust
Enforcement
- Principles that Have Guided the Evolution of Section 2 Standards
and Enforcement
- The Monopoly-Power Requirement
- The Anticompetitive-Conduct Requirement
- Assaults on the Competitive Process Should Be Condemned
- Protection of Competition, Not Competitors
- Distinguishing Competitive and Exclusionary Conduct Is Often Difficult
- Concern with Underdeterrence and Overdeterrence
- The Importance of Administrability when Crafting Liability Standards
Under Section 2
- Conclusion
Chapter 2: MONOPOLY POWER
- Introduction
- Market Power and Monopoly Power
- Identifying Monopoly Power
- Market Shares
- Courts Typically Have Required a Dominant Market Share to Infer
Monopoly Power
- Significance of a Dominant Market Share
- Market-Share Safe Harbor
- Durability of Market Power
- Market Definition and Monopoly Power
- Other Approaches to Identifying Monopoly Power
- Direct Evidence of High Profits, Price-Cost Margins, and Demand
Elasticity
- Direct Evidence of Anticompetitive Effects
- Conclusion
Chapter 3: GENERAL STANDARDS FOR EXCLUSIONARY
CONDUCT
- Introduction
- Allocation of Burdens of Production and Proof
- Proposed General Standards
- Effects-Balancing Test
- Profit-Sacrifice and No-Economic-Sense Tests
- Equally Efficient Competitor Test
- Disproportionality Test
- Conclusion
Chapter 4: PRICE PREDATION
- Predatory Pricing
- Introduction
- Background
- Analysis
- Frequency of Predatory Pricing
- Above-Cost Pricing
- Appropriate Measure of Cost
- Analytical Considerations
- Average Total Cost
- Measures of Incremental Cost
- Emerging Consensus Support for Average Avoidable Cost
- Recoupment
- Potential Defenses
- Meeting Competition
- Efficiency Defenses
- Equitable Remedies
- Conclusion
- Predatory Bidding
Chapter 5: TYING
- Introduction
- Background
- Analysis
- Potential Anticompetitive Effects
- Monopolizing the Tied-Product Market
- Maintaining a Monopoly in the Tying-Product Market
- Potential Procompetitive Effects
- Price Discrimination
- Technological Ties
- Tying Should Not Be Per Se Illegal
- Conclusion
Chapter 6: BUNDLED DISCOUNTS AND SINGLE-PRODUCT
LOYALTY DISCOUNTS
- Bundled Discounts
- Introduction
- Background
- Analysis
- Theories of Competitive Harm
- Potential Procompetitive Benefits
- Safe Harbors
- The Total-Bundle Predation-Based Safe Harbor
- The Discount-Allocation Safe Harbor
- Analysis of Bundled Discounts Falling Outside a Safe Harbor
- Conclusion
- Single-Product Loyalty Discounts
- Introduction
- Background
- Analysis
- Predatory-Pricing Analysis
- Foreclosure Analysis
- Conclusion
Chapter 7: UNILATERAL, UNCONDITIONAL REFUSALS
TO DEAL WITH RIVALS
- Introduction
- Background
- Analysis
- Using the Antitrust Laws to Require a Monopolist to Deal with a
Rival
- The Essential-Facilities Doctrine
- Conclusion
Chapter 8: EXCLUSIVE DEALING
- Introduction
- Background
- Supreme Court
- Courts of Appeals
- Analysis
- Potential Anticompetitive Effects
- Potential Procompetitive Effects
- Conclusion
Chapter 9: REMEDIES
- Introduction
- Goals of Section 2 Remedies
- Considerations in Crafting Remedies
- Equitable Remedies
- Conduct Remedies
- Prohibitory Provisions
- Affirmative-Obligation Remedies
- Structural Remedies
- The Special Challenge of Remedies in Technologically Dynamic Industries
- Monetary Remedies
- Private Monetary Remedies--Treble Damages
- Civil Fines
- Conclusion
Chapter 10: AN INTERNATIONAL PERSPECTIVE
- Introduction
- Concerns Raised by the Diversity in Approaches to Single-Firm Conduct
- Concerns About Uncertainty, Chilling Procompetitive Conduct, and
Forum Shopping
- Concern About Conflicting Remedies and Spillover Effects
- The Way Forward: Efforts to Encourage Convergence and Cooperation
in the Area of Single-Firm Conduct
- Bilateral Cooperation
- Participation in International Organizations
- Provision of Technical Assistance
- Additional Steps: What Should Be Done?
- Conclusion
APPENDIX: Hearings and Participants
TABLE OF AUTHORITIES
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