Antitrust Treatment of Dominant Antitrust Treatment of Dominant Firms: Is the Atlantic Getting Firms: Is the Atlantic Getting

Wider or Narrower?Wider or Narrower?

Ken GlazerKen Glazer

ABA Antitrust SectionABA Antitrust SectionMarch 31, 2005March 31, 2005

How Wide Is the Ocean? How Wide Is the Ocean?

In the area of “vertical” monopolization . . .In the area of “vertical” monopolization . . .

The ocean is as wide as ever if not wider.The ocean is as wide as ever if not wider.

Different TonesDifferent Tones E.U. approachE.U. approach

Dominant firm has “special responsibility not to allow Dominant firm has “special responsibility not to allow its conduct to impair genuine undistorted competition.”its conduct to impair genuine undistorted competition.”

Emphasized in Emphasized in Michelin II Michelin II and and BABA U.S. approachU.S. approach

“ “The successful competitor, having been urged to The successful competitor, having been urged to compete, must not be turned upon when he wins.” compete, must not be turned upon when he wins.” (Learned Hand)(Learned Hand)

““Even an act of pure malice by one business Even an act of pure malice by one business competitor against another does not, without more, competitor against another does not, without more, state a claim under federal antitrust laws.” (state a claim under federal antitrust laws.” (Brooke Brooke GroupGroup))

Predatory PricingPredatory Pricing

Brooke Group Brooke Group (USSC)(USSC) Below-cost pricingBelow-cost pricing Plus Plus plausible recoupmentplausible recoupment American Airlines American Airlines rejected attempt to broaden rejected attempt to broaden

test from AVC.test from AVC. Tetra Pak Tetra Pak (ECJ)(ECJ)

Not necessary to prove that dominant firm had Not necessary to prove that dominant firm had realistic chance of recoupingrealistic chance of recouping

““Consensual” Exclusive DealingConsensual” Exclusive Dealing

E.U.E.U. Presumptively illegalPresumptively illegal E.g., E.g., Hoffman-La Roche; AKZOHoffman-La Roche; AKZO

U.S.U.S. Rule of reasonRule of reason MicrosoftMicrosoft Many upheld (e.g., Many upheld (e.g., CDC v. IDEXCDC v. IDEX)) E.D. struck down recently in E.D. struck down recently in Geneva Pharmaceuticals Geneva Pharmaceuticals

v. Barr Labsv. Barr Labs

““Coerced” Exclusive Dealing (aka Coerced” Exclusive Dealing (aka Refusal To Deal) Refusal To Deal)

Strong presumption of illegality in E.U.Strong presumption of illegality in E.U. British PlasterboardBritish Plasterboard

Weak presumption of illegality in U.S.Weak presumption of illegality in U.S. Lorain JournalLorain Journal DentsplyDentsply Greater willingness to examine alternatives Greater willingness to examine alternatives

““Fidelity” or “Loyalty” RebatesFidelity” or “Loyalty” Rebates

Virtually per se illegal in E.U.Virtually per se illegal in E.U. Reaffirmed by CFI in Reaffirmed by CFI in Michelin IIMichelin II

In the U.S.In the U.S. At worst, rule of reason governsAt worst, rule of reason governs At best it is per se lawful (At best it is per se lawful (Concord BoatConcord Boat) ) Canada Pipe Canada Pipe followed rule of reason followed rule of reason

approach.approach.

Volume Rebates of Various KindsVolume Rebates of Various Kinds

Illegal in E.U. if they have “loyalty-Illegal in E.U. if they have “loyalty-inducing” (inducing” (MichelinMichelin IIII) or “fidelity-building” ) or “fidelity-building” ((British AirwaysBritish Airways) effect.) effect. Award for increasing purchases over some Award for increasing purchases over some

previous time period (previous time period (British AirwaysBritish Airways)) Award for purchasing higher amount on a Award for purchasing higher amount on a

scale applicable to all customers (scale applicable to all customers (Michelin IIMichelin II)) Lawful in the U.S. unless predatory under Lawful in the U.S. unless predatory under

Brooke GroupBrooke Group

Concluding ThoughtsConcluding Thoughts

E.U. test: fidelity-inducing or loyalty-E.U. test: fidelity-inducing or loyalty-enhancingenhancing

Very different from U.S. testVery different from U.S. test But European Comm’n is currently But European Comm’n is currently

rethinking its approach to dominance.rethinking its approach to dominance. Will that include proof of dominance? Will that include proof of dominance?