The characteristic case law phrase defining Section 2 jurisprudence is that it is intended to prohibit practices that would result in the “acquisition or maintenance” of monopoly power.69 The second half of this phrase provides most if not all of the support for the fallacious syllogism in antitrust and its consequences. The doctrine of “monopoly maintenance” sets up entrants and small competitors to be protected from the continuing encroachment by a dominant rival. This focus on rivals forces cases to adopt high if not impossible burdens, e.g., passing the absolute ef-ficiency defense set up by the “profit sacrifice screen.
Seeing whether a monopoly is being “maintained” also leads to the dubious “prior domi-nance” screen, when having a prior monopoly is irrelevant at best and perhaps should even be a defense against a monopolization charge. Monopoly maintenance leads one to look at the wrong
69 Grinnell, supra note 19 at 570-71.
market, the one the alleged monopolist is in, rather than one in which a market power that had not existed before is being created. This leads to both false positives and true negatives and placing intent ahead of effect in Section 2 law.
On the other hand, the “acquire” or “create” aspect of monopolization law is perfectly ap-propriate. The purpose of antitrust law in all of its aspects should be to prevent monopolies from arising where they would not otherwise occur. This is exactly the question asked under Section 1 or Section 7: Did price fixing, market allocation, or some other agreement prevent competition from otherwise taking place? Would a merger inhibit competition, either through the direct sup-pression of independent action by the merging firms or by increasing the likelihood of collusion among the remaining participants in the relevant product and geographic market?
The CMM approach restates this same question for monopolization. Where exclusion, fore-closure, or raising rivals’ costs is alleged, the competitive harm in question requires the creation of market power over an input or complementary market that did not exist before.70 Such an analysis requires that we delineate relevant complementary markets and ask whether sufficient control over that market has been acquired to raise that good or service’s price to buyers. The concern is economically important whether or not the buyers are rivals of the alleged monopolist, and whether or not that alleged monopolist had a monopoly prior to acquiring control over the input or complementary market. The extent to which new firms can enter to supply buyers, in-cluding entry by the buyers themselves into the complementary market, is crucial, just as it is in standard horizontal merger analysis.
These together suggest that the path of legal reform that would better rationalize monopoliza-tion jurisprudence is to keep the good, “create,” and delete the bad, “or maintain.” This would strengthen monopolization’s conceptual roots, and place it on the same sound foundation as the other threads of antitrust practice. The apparent paradox is that nominally reducing the scope of Section 2 by eliminating monopoly maintenance doctrines would broaden its reach by decoupling it from the criticism that it is about protecting competitors and not competition.
70 In the case of monopolization by regulated firms, vertical integration into unregulated markets may facilitate the exercise of input market power that was nominally controlled through price regulation (Bren-nan, 1987).
IX. Summary
Section 2 monopolization law has resisted the economic consensus approach that has come to dominate the other two prongs of antitrust—collusion law and mergers—because of an undue focus on rivals. As the fallacious syllogism illustrates, this premise has been accepted by those who believe that monopolization cases should bear a high if not insurmountable burden. The fal-lacy is also shared by those who think that antitrust should be a vehicle for refereeing fair play among competitors.
This has led to two spurious screens that have dominated monopolization jurisprudence. The first, prior dominance, is irrelevant, diverting attention away from competitive effects and toward the character of the alleged perpetrator. Not only is proving prior dominance contrary to proving that market power hinges on the alleged exclusionary practice, but prior dominance is more likely be a defense, in that the marginal harm for additional exclusion is likely to be small and the mar-ginal benefit greater. The second spurious screen, profit sacrifice, also diverts attention from competitive harm to, ironically, the effect on the perpetrator. We show that it creates an absolute efficiency defense, and converts the issue from effect to intent. These errors are especially seri-ous when regulated firms monopolize, particularly in network industries.
The complementary market monopolization approach eliminates these difficulties. It is both necessary as a means for creating injury to downstream firms (whether or not rivals of the perpe-trator), and should be prima facie sufficient for antitrust liability on its own, perhaps with prior dominance of a primary market as a defense, rather than a condition of guilt. Moreover, by di-recting attention toward a monopolized input or complementary market, it allows the tools of horizontal analysis—market delineation, concentration, entry barriers, competitive effects—to be employed in Section 2 cases. These appropriate screens replace the spurious profits sacrifice and prior dominance tests. Vertical relationships matter, but primarily only in the way that buyer preferences matter in standard horizontal merger cases. We examine but three of the many nota-ble monopolization cases in recent years to illustrate how CMM can clarify the analysis.
CMM may inform bundling cases by comparing the lost benefits of a discount to breach pay-ments for reneging on exclusive dealing contracts. Some cases, few in our opinion, require a more dynamic, strategic approach, but these are quite different from the static approaches often used in these settings, as the Microsoft cases illustrate. The CMM approach, in particular observ-ing the peculiarities it suggests regardobserv-ing the profit sacrifice screen, may inform the analysis of alleged predatory pricing.
A simple fix to Section 2 jurisprudence can refocus attention away from intentional harms done by dominant firms to protection-worthy rivals and toward the monopolization of previously competitive complementary markets by anyone. This fix is to delete “or maintain” from the “cre-ate or maintain” standard set of Section 2 allegations. Emphasizing only the “cre“cre-ate” aspect says that monopolization cases should turn on the same question asked in collusion or merger cases:
Does the practice under scrutiny establish market power where none existed previously? Restrict-ing monopolization doctrine in this way can save Section 2, restorRestrict-ing its appropriate standRestrict-ing in the antitrust family.
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