Monopolization: Power Plus Exclusionary Conduct

The second section of the Sherman Act makes it an offense to monopolize, to attempt to monopolize, or to combine or conspire to monopolize any part of trade or commerce. It defines none of those verbs. Everything that makes the section workable — the two-element structure, the share figures, the catalog of exclusionary practices, the safe harbor for competition on the merits — comes from a century of judicial construction, and the construction is still moving.

The elements, and the distinction they draw

A monopolization claim has two elements: possession of monopoly power in the relevant market, and the 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. The second element is the whole of the offense. A firm that dominates because customers prefer what it sells has committed no violation, and it commits none by continuing to sell what customers prefer.

That framing produces a familiar difficulty. Vigorous competition and exclusion look alike from the outside: both drive rivals out, both cut their sales, both end in a concentrated market. Courts have accordingly built the analysis around whether the conduct makes sense as competition on the merits — whether it would be profitable even if it did not weaken a rival — rather than around its effect on any particular competitor.

Monopoly power and how it is shown

Monopoly power is the power to control prices or exclude competition. It is ordinarily inferred from a dominant share in a properly defined market together with barriers that prevent entry from eroding that share, which makes the definition of the relevant market the load-bearing part of most section 2 cases.

No share threshold is fixed by law. An influential early opinion suggested that ninety percent is enough, that sixty to sixty-four percent is doubtful, and that a third is certainly not enough, and courts have generally followed that intuition: findings of monopoly power below fifty percent are rare, and the litigated cases usually involve shares of seventy percent or more. Share alone does not settle it. A high share in a market with easy entry, rapid technological change or powerful buyers may not confer durable power, and a lower share may suffice where entry is blocked.

Direct evidence can substitute for the inference. Where a plaintiff can show that the defendant actually raised price above the competitive level and restricted output, and that the pattern persisted, the share analysis becomes a check rather than the proof.

What makes conduct exclusionary

There is no single test, and the Supreme Court has not supplied one. The framework most courts use, drawn from the leading platform software case, proceeds in shifts: the plaintiff must show that the conduct has an anticompetitive effect, meaning harm to the competitive process and thereby to consumers rather than harm to a rival; the defendant may offer a non-pretextual procompetitive justification; the plaintiff may rebut it or show that the anticompetitive harm outweighs the benefit.

The recurring categories are familiar from elsewhere in the antitrust laws. Exclusive dealing that forecloses a substantial share of distribution, bundled and conditional discounts that make rivals uneconomic to carry, tying that leverages one product to protect another, denial of interoperability, and deception of a standard-setting body all appear as exclusionary conduct claims. The analysis borrows heavily from the foreclosure inquiry used for exclusive arrangements, with the difference that a monopolist's conduct is judged against a market it already dominates.

Predatory pricing occupies its own corner. A plaintiff must show pricing below an appropriate measure of the defendant's costs and a dangerous probability that the defendant would recoup its investment in below-cost prices after the rival exits. The recoupment requirement is what makes these claims difficult: without it, cutting prices would be actionable, which would deter exactly the conduct the antitrust laws are meant to encourage.

The freedom not to deal, and its edges

A firm, including a monopolist, may generally choose the parties with which it will do business. The Supreme Court has emphasized that compelling firms to share the source of their advantage sits uneasily with antitrust's purposes, that forced sharing requires courts to act as central planners setting price and terms, and that it may facilitate collusion by putting rivals in continuous contact.

One decision remains at or near the outer boundary of liability. There, a dominant ski operator terminated a longstanding and profitable joint ticket arrangement with a smaller rival and refused to sell it lift tickets even at retail prices, a refusal that sacrificed short-run profit and was explicable only by the prospect of eliminating a competitor. The features courts extract from it are a prior voluntary and profitable course of dealing, a unilateral termination of it, and the defendant's willingness to forgo present revenue. Absent those features, refusal-to-deal claims almost always fail.

Firms that lose an antitrust argument here sometimes find protection elsewhere. Legislatures have written statutory constraints on termination in particular industries, and a supplier free under the antitrust laws to drop a distributor may still be bound by state dealer protection statutes that require cause and notice.

Attempt, conspiracy and the elements compared

The Supreme Court has insisted that attempt claims include a dangerous probability of success, rejecting the view that unfair conduct plus intent is enough. That holding forced attempt plaintiffs to define a market and prove substantial power short of monopoly, and it eliminated a route by which ordinary business torts had been recast as federal antitrust claims. The comparison with the first section is worth keeping in view, because a plaintiff who cannot prove power may do better with an agreement theory analyzed under the per se rule or the rule of reason.

What a court will actually order

Government cases are brought in equity and the available relief is broad: injunctions against specific practices, mandatory licensing or interoperability, and in principle divestiture or dissolution. Structural relief has been ordered rarely, and appellate courts have set aside such orders where the record did not connect the remedy to the violation found. Conduct remedies are more common and are criticized on the ground that they require ongoing judicial supervision of a business.

Private claimants sue for damages and injunctions, and the damages are trebled, which makes a successful section 2 case very expensive. Those actions carry their own threshold problems of causation and remoteness taken up under antitrust injury and standing, and a claimant several steps down a distribution chain from the monopolist will often find that the substantive case is the easier half.