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Exclusion continuum

Exclusion continuum (most P-friendly cases first):

Lorain Journal: everyone agrees P should have won

  • P: anticompetitive exclusion in response to entry
  • D: no procompetitive justifications (court rejects argument that D was just exercising its right to choose who to deal with)

McWane (pipe fittings): 80% agreement that P should have won

  • P:
    • Similar to Lorain: McWane was the incumbent monopolist, Star enters, McWane responded with exclusionary conduct
    • Substantial switching costs: Star can't enter the market at the same scale as McWane, distributors are reluctant to switch to Star because Star isn't full service
    • Testimony from distributors that they feared being cut off by McWane if they switched to Star
    • High likelihood of harm: P grew slower than expected
    • No benefits from exclusive dealing: only reason D created the policy was to exclude P
  • D:
    • Contract was short term
    • No direct proof of harm to entry: P entered the market and got 10% share

Gilbarco (gas dispenser): D won, will win most of the time

  • P:
    • P's one-stop-shop arrangement was procompetitive, D's exclusive dealing response was an anticompetitive attempt to protect oligopoly
    • There are high switching costs
    • Exclusive dealing enables tacit collusion
  • D:
    • Short contract duration
    • No proof of foreclosure, i.e., that seller of dispenser can't find buyers: competitors can sell through another distributor or directly to customers
    • There are benefits to exclusive dealing: every petrol distributor was organized to sell dispensers, which was an efficient way to structure the market

Meritor (truck transmissions): P won because of non-price constraints (note D wins if price is the clear driving force behind the exclusion because Brooke Group would apply)

  • P:
    • Anticompetitive long-term market-share discounts in response to entry
    • Codebook exclusion
    • Possible loss of supply
  • D: prices were above cost

Evolution of law: restraints incentivize companies to avoid the most anticompetitive practices; the practices that are left are mixed in terms of their anticompetitive effects.

Exam note: analogize to restraints from cases and give arguments about what is anticompetitive/procompetitive.