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Sherman Act Section 2 Committee Hot Topics in Monopolization Law. “Section 2 in the Antitrust Division”. J. Bruce McDonald March 31, 2005. UNITED STATES DEPARTMENT OF JUSTICE ANTITRUST DIVISON DIVISION. Section 2 Hot Topics Your Panel.

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Sherman act section 2 committee hot topics in monopolization law
Sherman Act Section 2 CommitteeHot Topics in Monopolization Law

“Section 2 in the Antitrust Division”

J. Bruce McDonald

March 31, 2005

UNITED STATES DEPARTMENT OF JUSTICE

ANTITRUSTDIVISONDIVISION


Section 2 hot topics your panel
Section 2 Hot TopicsYour Panel

  • Bruce McDonald, DOJ – Section 2 in a Second Bush Administration

  • Aryeh Friedman, Program Chair – Trinko impact on price squeeze claims

  • Paul Hewitt, Akin Gump – How to exclude competitors using category management

  • Ken Glazer, The Coca-Cola Company – Worries of the dominant firm in the US and EU

  • Mary Anne Mason, Hogan & Hartson – EU takes on Microsoft


Section 2 hot topics doj antitrust division
Section 2 Hot TopicsDOJ Antitrust Division

Enforcement Hierarchy

  • Criminal cartel conduct

  • Mergers

  • Civil violations of Sherman Act §§ 1 and 2


Section 2 hot topics doj antitrust division1
Section 2 Hot TopicsDOJ Antitrust Division

Section 2 Enforcement

  • Harms from monopolization demand vigorous enforcement

  • Objective standards maintain balance and limit harm from unwarranted challenges

  • Section 2 caution justified by difficulty in distinguishing procompetitive and anticompetitive behavior


Section 2 hot topics u s v dentsply court decisions
Section 2 Hot TopicsU.S. v. DentsplyCourt Decisions

District Court Findings:

  • Dentsply market share enough to infer monopoly power

  • Dentsply a price leader

  • Dentsply enforced exclusivity policy solely to exclude competitors

  • But for Dentsply exclusivity policy, prices would be lower

  • Dentsply justifications “pretextual”

Judgment for Dentsply

What happened?


Section 2 hot topics u s v dentsply court decisions1
Section 2 Hot TopicsU.S. v. DentsplyCourt Decisions

Additional District Court finding:

  • Direct sales a viable method of distribution

    No monopoly. No maintenance. No violation.


Section 2 hot topics u s v dentsply court decisions2
Section 2 Hot TopicsU.S. v. DentsplyCourt Decisions

(1) Monopoly power

(2) Willful maintenance


Section 2 hot topics u s v dentsply court decisions3
Section 2 Hot TopicsU.S. v. DentsplyCourt Decisions

  • Monopoly Power

    District Court:

  • High market share may ordinarily raise an inference of monopoly power

  • But not where there is evidence of a defendant’s inability to control prices or exclude competitors

    • Dentsply could not exclude because “direct selling to the laboratories is a viable …method of distribution”


Section 2 hot topics u s v dentsply court decisions4
Section 2 Hot TopicsU.S. v. DentsplyCourt Decisions

(1) Monopoly Power

Appeals Court:

  • Monopoly power may be inferred from a predominant share of the market

  • But the ability to maintain market share is what counts

    • Market reality – Direct sales not a practical alternative

    • Market reality – Rivals could theoretically convince dealers to drop Dentsply, but that has not happened


Section 2 hot topics u s v dentsply court decisions5
Section 2 Hot TopicsU.S. v. DentsplyCourt Decisions

  • Willful Maintenance

  • District Court:

  • No exclusionary conduct

  • “[B]ecause direct distribution is viable, non-Dentsply dealers are available, and Dentsply dealers may be converted at any time, the DOJ has failed to prove that Dentsply’s actions have been or could be successful in preventing ‘new or potential competitors from gaining a foothold in the market.’”


Section 2 hot topics u s v dentsply court decisions6
Section 2 Hot TopicsU.S. v. DentsplyCourt Decisions

(2) Willful maintenance

Appeals Court:

  • “The proper inquiry is not whether direct sales enable a competitor to ‘survive’ but rather whether direct selling ‘poses a real threat’ to defendant’s monopoly.” U.S. v. Microsoft, 253 F.3d 34, 71 (D.C. Cir. 2001).

  • Small shares of competitors show that direct selling not viable

  • Many labs prefer to buy through dealers

  • Exclusivity “created a strong economic incentive for dealers to reject competing lines in favor or Dentsply’s teeth”


Section 2 hot topics u s v dentsply court decisions7
Section 2 Hot TopicsU.S. v. DentsplyCourt Decisions

Appeals Court:

Reversed and rendered


Section 2 hot topics u s v dentsply importance of dentsply
Section 2 Hot TopicsU.S. v. DentsplyImportance of Dentsply

Importance for Section 2 enforcement

  • Focus on market realities important under balanced Section 2 standards

  • Microsoft “significant contribution” standard demands real competition

  • Declined to follow old, tired, distinguishable exclusive dealing cases


Section 2 hot topics doj antitrust division future of section 2 enforcement
Section 2 Hot TopicsDOJ Antitrust DivisionFuture of Section 2 Enforcement

At DOJ

  • Follow “no economic sense” standard

  • Prosecute violations vigorously

  • Clarify standards


Section 2 hot topics doj antitrust division future of section 2 enforcement1
Section 2 Hot TopicsDOJ Antitrust DivisionFuture of Section 2 Enforcement

DOJ study recommendations to Antitrust Modernization Commission

  • Be cautious about changing statutory language

  • Do Section 2 treble damages deter anticompetitive conduct or procompetitive conduct?


Sherman act section 2 committee hot topics in monopolization law1
Sherman Act Section 2 CommitteeHot Topics in Monopolization Law

“Section 2 in the Antitrust Division”

J. Bruce McDonald

March 31, 2005

UNITED STATES DEPARTMENT OF JUSTICE

ANTITRUSTDIVISONDIVISION


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