Download Monopoly Power: Getting it and keeping it

Monopoly Power: Getting it
and keeping it
US Perspective
Sharis Pozen, Partner
ACCE Seminar
13 May 2008
© Hogan & Hartson LLP. All rights reserved.
Overview
•
Differing Approaches
–
Sherman Act, Section 2
–
EU Article 82
•
In US, Types of Conduct at Issue
•
Developments in Bundling
•
Variety of Approaches
•
Conclusion
© Hogan & Hartson LLP. All rights reserved.
2
Sherman Act Section 2
© Hogan & Hartson LLP. All rights reserved.
3
US-EU Laws
•
Sherman Act, Section 2
–
Generally allow even a monopolist to exercise or
exploit lawfully acquired market power
 E.g.,
allows “monopoly pricing”
 Incentive
and reward for superior performance and
innovation
 Allows
–
fair but aggressive competition
Protects competition, not competitors
 Encourage
 Avoid
–
•
efficiency
protecting less efficient rivals
Prohibits only “antitrust injury”
Article 82
–
Focuses on abuse of dominance
© Hogan & Hartson LLP. All rights reserved.
4
Monopolization
•
Actual monopolization
–
Monopoly power
 Power
to control price and exclude competition
 Usually
–
•
•
require >70-75% market share
Willful acquisition or maintenance of that power (“as distinguished
from growth or development as a consequence of a superior
product, business acumen, or historic accident”)
Attempted monopolization
–
“Dangerous probability” of monopoly power (usually >50% market
share)
–
Specific intent to monopolize
Both also require something more – “exclusionary
conduct”
© Hogan & Hartson LLP. All rights reserved.
5
US Anticompetitive Practices
•
Once a firm has monopoly power, the US law puts some limits
on certain conduct a monopolist may undertake, such as:
–
Predatory Pricing
–
Exclusive Arrangements
–
Refusal to Deal
–
Tying
–
Bundling
© Hogan & Hartson LLP. All rights reserved.
6
Other Forms of Monopolization
•
•
Predatory pricing (Brooke Group)
–
Pricing “below cost” (probably average variable cost)
–
Expectation of recoupment
Exclusive arrangements
–
•
Refusals to Deal
–
•
Includes refusal to provide a competing firm with reasonable
access to an essential resource
Tying
–
•
Exclusive contracts with the purpose and effect of depriving competitors of
important supplies or distribution outlets
Allowing a customer to purchase one product only if that customer
purchases another product over which the seller has monopoly
power
These arrangements are not per se illegal, but instead are
judged under the Rule of Reason standard
© Hogan & Hartson LLP. All rights reserved.
7
Other Forms of Monopolization:
Bundling
•
•
•
Types of bundling
–
Integration
–
Requiring the sale of two or more products together
LePage’s v. 3M (3d Cir. 2003)
–
Prohibited bundling that foreclosed part of market to a competitor that did
not manufacture equally broad array of products so couldn’t make
comparable offer
–
Rejected argument that bundling cannot be anticompetitive if price is
“above cost”
–
Focused on customers’ inability to give up the benefits of the bundle
–
No focus on whether competitors are as efficient as the bundling firm
PeaceHealth (9th Cir. 2007)
–
Adopted cost-based test
–
Bundling not unlawful unless “bundler” is selling product(s) on which
“bundler” competes with plaintiff below average variable cost if entire
discount attributed to such product(s)
–
Supreme Court may ultimately adopt this position (also recommended by
Antitrust Modernization Commission)
© Hogan & Hartson LLP. All rights reserved.
8
Variety of approaches
•
“Profit sacrifice” test – departure from profit-maximizing
behavior (but what time frame relevant?)
•
“No economic sense” test – conduct makes no economic
sense except as a way of eliminating competition
•
“Less efficient rival” test – conduct can’t be exclusionary
unless would eliminate equally or more efficient rival
•
“Balancing” test – balance efficiency or other benefits of
conduct against effects on consumers and rivals
•
Also use “cheap or naked exclusion“ analysis
–
Can be low cost or no cost conduct
–
Fraud or deception in standards making is example
© Hogan & Hartson LLP. All rights reserved.
9
Conclusion
•
Convergence/Divergence
–
•
US v. EU
•
Political Overlay
•
US Microsoft and Intel Cases
•
Latest Developments
–
Schering
–
Rambus
Other Issues:
–
Litigation costs and Risks
–
Remedy
© Hogan & Hartson LLP. All rights reserved.
10
For more information on
Hogan & Hartson, please visit us at
www.hhlaw.com
Baltimore
Beijing
Berlin
Boulder
Brussels
Caracas
Colorado Springs
Denver
Geneva
Hong Kong
London
Los Angeles
Miami
Moscow
Munich
New York
Northern Virginia
Paris
Shanghai
Tokyo
Warsaw
Washington, DC
© Hogan & Hartson LLP. All rights reserved.
11