Refusals to deal

Unilateral refusals to deal after Trinko: firms have a duty to deal limited to situations where a firm (1) gains market power, (2) breaks from past practice, and (3) sacrifices present profits (limited reading of Aspen Skiing) - however, courts typically accord companies great latitude when deciding whether to deal with competitors

• A narrower, less common interpretation is that antitrust liability for failure to deal is limited to cases where regulation (1) targets market power ("monopoly") and (2) creates substantial duties to cooperate with competitors

Boundary between antitrust law and regulation: if a firm's market power is too substantial, then Sherman Act Sections 1 and 2 aren't enough to regulate market power, need direct regulation to layer on top of antitrust law

• E.g., the Sherman Act is insufficient to regulate utilities like water and electricity
• On the boundary, antitrust law should defer to direct regulation (e.g., Trinko)

Essential facilities doctrine: associated with older line of cases finding Section 2 violations for refusals to deal

1. Control of essential facility
2. Inability of competitor to reasonably duplicate
3. Denial of use
4. Feasibility of access Criticisms: (a) requiring competitors to share facilities undermines incentives to invest in facilities; (b) requires extensive and continuing court supervision (puts court in regulatory role rather than role of deciding cases)

Caselaw:

Verizon v. Trinko (2004) (limited duty to deal, no duty in regulation context)

• Holding: judgment as a matter of law, no exclusionary conduct
  • Entities regulated under the Telecom Act are not shielded from antitrust liability
  • Policy reasons for not imposing a duty on competitors to cooperate:
    • Incentives:
      • Incumbents are incentivized to engage in bad faith "cooperation" to hinder competitors as much as possible without violating the law
      • Firms will decrease investments in their infrastructure if they share with others
    • Administration:
      • False positives: getting enforcement wrong chills competition
      • Cost: it's expensive for the court to act as a regulator and oversee deals with rivals
    • Collusion: duty to cooperate can incentivize collusion, which the Sherman Act is supposed to prevent through Section 1
  • Distinguishes case from Aspen Skiing (which it identifies as the outer bounds)
    • Voluntary dealing in Aspen Skiing, dealing forced by statute here
    • Cooperation in comparison markets in Aspen Skiing, no such comparison here
    • No business justification in Aspen Skiing, cooperation not in the ILEC's self-interest here (just being forced to cooperate by statute)
• Facts: similar to Twombly - baby Bell (ILEC) required to share and interoperate technologically with competitors per Telecom Act, Verizon tried to do as bad a job at cooperating as possible, FTC identified behavior as exclusionary. P brought suit under Section 2.
• Notes: when dealing with regulation, antitrust analysis must be "attuned to the particular structure and circumstances of the industry at issue" and show "awareness of the significance of regulation"
  • Benefits of antitrust enforcement are minimal:
    • Duties to cooperate under regulation are more demanding than under Sherman Act
  • Costs of antitrust enforcement are high:
    • False positives
    • Expensive for courts
    • Long-term regulatory burden for the courts
      • Counterargument: can't FTC handle this burden?
  • Narrow reading of case: antitrust liability for exclusionary failure to deal with a competitor is limited in cases where regulation targets market power ("monopoly") and creates a duty to cooperate with competitors
  • Broad reading of the case: antitrust liability is limited for any failure to deal with competitors (common reading by federal courts)
  • Essential facilities doctrine: invoked by lower courts but not SCOTUS in this opinion, currently not popular but could be relevant in Democrat administrations

U.S. v. Colgate (1919)

• Holding: there is no requirement to deal
• Note: not interpreted broadly, there are requirements to deal under certain conditions

Additional cases:

• Lorain Journal v. U.S.: refused to deal with/accept vouchers from Aspen Highlands, had a duty to deal given history of dealing and a lack of justification
• U.S. v. Microsoft: refused to deal with OEMs who didn't agree to conditions
• Bell Atlantic v. Twombly: ILECs had duty to share and interoperate technologically with competitors