The Dominance and Monopolies Review: USA
The US Supreme Court has emphasised that the opportunity to attain a monopoly and reap its benefits encourages investment and innovation.2 Thus, possessing and exercising monopoly power does not violate US antitrust law 'unless it is accompanied by an element of anticompetitive conduct '.3 Unlike the competition laws of many other jurisdictions, therefore, US antitrust law does not recognise claims for abuses of dominance that merely exploit existing monopoly power, such as claims for excessive pricing. This difference in focus is reflected throughout the standards adopted in US law, as discussed below.
The US antitrust statute specific to monopolies is Section 2 of the Sherman Act, 15 USC Section 2. It provides that '[e]very person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony'. US law recognises three separate violations that arise under this statute:
- monopolisation, which requires monopoly power and anticompetitive conduct that helps to obtain or maintain that power;4
- attempted monopolisation, which requires a dangerous probability of achieving monopoly power, anticompetitive conduct that threatens to help achieve that power and a specific intent to monopolise;5 and
- conspiracy to monopolise, which requires a conspiracy, a specific intent to monopolise and an overt act in furtherance of that conspiracy.6
The Sherman Act can be enforced in civil actions through injunctions brought by the US Department of Justice (DOJ) and through private litigation, as detailed below.7
Other statutes also apply to the behaviour of monopolists. Most notable is Section 5 of the Federal Trade Commission (FTC) Act, 15 USC Section 45, which prohibits 'unfair methods of competition'. The FTC Act reaches all conduct covered by the Sherman Act and probably reaches more broadly.8 It can be enforced solely by the FTC through civil action for injunctions and prospective cease-and-desist orders.9
Many US states have analogous statutes that apply to monopolists. In addition, in certain industries, other regulations can also apply to and potentially limit monopolists.
Year in review
In the past year, the Supreme Court issued a decision concerning 'direct purchasers' that may expose operators of two-sided platforms to antitrust claims from both consumers and merchants using the platform. Qualcomm appealed a monopolisation judgment against it for abuse of standard-essential patents, prompting a rare public split between the FTC and DOJ. The FTC challenged a healthcare technology company's exclusivity rebates. And the FTC settled with a pharmaceutical company based on a 'product hopping' theory.
i Supreme Court holds that App Store customers can pursue antitrust claims against Apple
In May 2019, the Supreme Court held that App Store customers were direct purchasers and so could proceed on their claims that Apple's policy of charging app developers 30 per cent of their sales through the App Store violated Section 2 of the Sherman Act.10 (Indirect purchasers do not have standing to pursue federal antitrust claims for damages in the United States.) Apple argued that individuals who purchase apps through the App Store could not be considered direct purchasers under the Supreme Court's earlier decision in Illinois Brick, because the app developers and not Apple set the price the consumer paid for the app.11 Apple also argued that classifying both app developers and App Store customers as direct purchasers would open Apple up to duplicative liability, a significant motivation for the Supreme Court's Illinois Brick decision.
The Supreme Court construed the concept of 'direct purchaser' more simply—a customer that has a direct contractual relationship with the defendant. It, therefore, found plaintiffs to be direct purchasers because they purchased the apps directly from Apple. The Court concluded that this rule better comported with the text of the Sherman Act, that upstream pricing arrangements between a manufacturer and retailer were irrelevant to the Illinois Brick analysis, and that a contrary ruling would allow retailers to immunise themselves from antitrust liability by artfully drafting their contracts with manufacturers. The Court acknowledged that its holding means that both app manufacturers and app purchasers might have antitrust claims against Apple.
ii Qualcomm pursues appeal in standard-essential patent case, prompting public split between FTC and DOJ
In May 2019, the District Court for the Northern District of California entered a judgment for the FTC in its suit against Qualcomm.12 The Court found that Qualcomm conditioned the supply of its modem chips on mobile phone manufacturers agreeing to a Qualcomm patent licence for competitors' modem chips. The Court held that this 'no licence, no chips' policy imposed an anticompetitive 'tax' on competing chips. The Court also held that Qualcomm's refusal to license its standard-essential patents to its competitors was an illegal refusal to deal. The Court further found that Qualcomm had entered de facto exclusive dealing arrangements with many original equipment manufacturers (OEMs) based on the conditioning of market development funds and technical support on their purchases of Qualcomm chips, and that Qualcomm had entered an express exclusive agreement with Apple. The Court entered an order mandating that, among other things, Qualcomm offer licences to its competitors and that it renegotiate its licences with OEMs without the threat of withholding its modem chips.
Qualcomm appealed the decision to the Ninth Circuit. On the 'no license no chips' and exclusive dealing holdings, Qualcomm argued that its royalty requirements are not anticompetitive because they are neither paid by nor harm competitors.13 On the refusal to license holdings, Qualcomm argued that it has no duty to offer exhaustive licences to its standard essential patents to its competitors under the Supreme Court's Aspen Skiing and Trinko holdings because Qualcomm has no history of profitably and voluntarily doing so and did not change its practices to sacrifice short-term profits.14 The FTC argued that what it called the 'heightened standard' for refusals to deal under Aspen Skiing and Trinko did not apply in this case because Qualcomm had already made voluntary commitments to standard setting organizations to license its patents under fair, reasonable and non-discriminatory terms. The FTC argued that the Ninth Circuit should follow the Third Circuit's Broadcom v. Qualcomm decision in finding that breaching commitments made to a standard setting organisation could state a monopolisation claim.15 The FTC defended the District Court's other holdings based on arguments that largely followed the district court's analysis.16
In a surprising move, the DOJ filed an amicus curiae brief and appeared at oral argument in support of Qualcomm's position, signalling a rare public break between the agencies on the issue of standard-essential patents and Qualcomm's 'no license, no chips' policy.17 The DOJ's brief echoed Qualcomm's arguments, emphasising that royalties were charged to customers, not competitors, and that the district court had failed to properly apply the Supreme Court's heightened duty-to-deal framework.18 The DOJ also argued that the district court failed to consider whether its global injunction was in the public interest, which the DOJ noted was a serious question given that it had the potential to stifle innovation and endanger national security by unduly impairing Qualcomm's ability to invest in R&D, participate in setting standards and supply the government.19
iii FTC pursues Section 2 claims against electronic prescription service provider based on exclusivity rebates
In April 2019, the FTC filed suit against Surescripts, LLC, alleging that it violated Section 2 of the Sherman Act by maintaining a monopoly in prescription routing and eligibility.20 Routing involves the transmission of prescription-related data from a prescriber to a pharmacy; eligibility refers to the transmission of formulary and benefit information from a payer (such as an insurance company) to a prescriber's electronic health record system. The FTC alleged that, beginning in 2009, Surescripts began conditioning its customer pricing on whether the customer routed 100 per cent of its transactions through Surescripts's routing and eligibility systems. The FTC argued that this had the effect of foreclosing at least 70 per cent of each of the routing market and eligibility market to Surescripts's competitors. The agency further alleged that Surescripts engaged in other anticompetitive behaviour, including the use of threats as well as a non-compete agreement with a competitor, to maintain its monopoly.
Surescripts moved to dismiss the FTC's complaints arguing that it failed to state a claim under the Sherman Act because the FTC had not alleged that Surescripts's prices were 'predatory' and that the FTC had failed to allege that its loyalty programmes created any anticompetitive effects. Surescripts also argued that since it operates in two-sided markets (that is, for referral, between doctors and pharmacies; and for eligibility, between doctors and insurance companies), the FTC must demonstrate foreclosure on both sides of each market. In January 2020, the district court rejected these arguments, concluding that pricing schemes that sufficiently differentiate between customers that exclusively purchase from the supplier and those that do not can be considered de facto exclusive dealing arrangements and are unlawful under Section 2 if the plaintiff can show these arrangements foreclosed competition to a substantial degree and had a significant effect in preserving the defendant's monopoly.21 The district court also held that the FTC had adequately alleged harm to both sides of the markets where Surescripts is active.22
iv FTC obtains settlement in a product hopping case
In July 2019, Reckitt Benckiser Group PLC (Reckitt), the maker of an opoid replacement therapy called Suboxone, agreed to pay US$50 million to settle allegations that it violated Section 5 of the FTC Act. The FTC alleged that Reckitt had engaged in 'product hopping' – developing a new formulation of a drug and discontinuing or de-emphasising the old formulation to avoid generic substitution.23 The FTC explained that this practice allows a monopolist to avoid the additional competition from generic drugs enabled by state laws allowing pharmacists to substitute equivalent generic drugs to fill a prescription.24 Because the new formulation and old formulation are not considered 'equivalent' under these state laws, and because the new formulation has patent protection, a prescription for the new formulation cannot be substituted to a generic drug.25
For Suboxone in particular, it had traditionally been sold as tablets; Reckitt later developed a film version of the drug. The FTC alleged that, after multiple generic drug manufactures had filed applications with the US Food and Drug Administration, Reckitt not only introduced a new formulation, but it also 'fabricated a safety story' about paediatric exposure, filed a false citizen petition with the FDA against the tablet formulation based on that story, increased tablet prices and announced that it was discontinuing the tablet formulation to further encourage physicians to prescribe the film formulation.26 Reckitt by contrast continues to argue in associated private litigation that its switch to film was part of an effort to produce and market a superior product.27
The FTC and Reckitt settled the claims without an admission of misconduct, agreeing to pay US$50 million to the FTC; disclose the scientific basis of any future citizens' petitions filed with the FDA; notify the FTC of any applications for approval of a follow-on drug by the FDA; and refrain from pulling the original drug product from the market or taking certain other actions as a result of the follow-on drug application unless the FDA has determined there are legitimate safety concerns.28 The US District Court for the Eastern District of Pennsylvania recently certified classes in a parallel private litigation.29
Market definition and market power
Monopoly power is a prerequisite to bringing a monopolisation claim. Monopoly power is the ability to control prices or exclude competition.30 It can be proven through direct evidence of actual price increases or the exclusion of rivals. More typically, however, courts infer monopoly power from the combination of high market shares and entry barriers. Higher market shares are more likely to support the inference of monopoly power, and typically shares below 50 per cent cannot support that inference.31 But even a very high share does not automatically establish monopoly power.32
Monopoly power is not required for attempted monopolisation or conspiracy to monopolise claims. Attempted monopolisation instead requires only a 'dangerous probability' of achieving monopoly power, and thus can be sustained with a lesser showing of market power. A conspiracy to monopolise arguably requires no showing of market power at all, although cases alleging a conspiracy to monopolise in the absence of market power are relatively rare.
Inferring monopoly power requires measuring market shares, and thus requires defining a relevant market. Relevant markets have both product and geographic dimensions. Product markets are defined by looking at what products are reasonably interchangeable substitutes for one another.33 Geographic markets are defined by looking at what other geographies sellers operate in and buyers can turn to.34 One method that is often used to determine what products or geographies are in the market is to ask whether customers would substitute from one product or geography to another in response to a small price increase above competitive levels.35
Monopolisation requires anticompetitive conduct that helps to obtain or maintain a monopoly. Obtaining or maintaining a monopoly through other means, such as 'superior product, business acumen or historic accident', is therefore not a violation.36
US courts and antitrust regulators have not established a definitive list of what conduct can be anticompetitive; nor have they adopted clear standards for distinguishing between pro-competitive and anticompetitive conduct. The DOJ did issue guidance on monopolisation in 2008, but withdrew it in May 2009.37 The Supreme Court has, however, clarified that where two-sided platforms (such as credit cards) are concerned, courts evaluating antitrust claims must consider the impact of the defendant's conduct on both sides of the market and indicated that pro-competitive effects on one side of the market might be able to justify some anticompetitive impacts on the other.38
The list below, although not exhaustive, discusses the most important types of potential anticompetitive conduct that courts and regulators have recognised could support a monopolisation claim.
ii Exclusionary abuses
Predatory pricing is charging low prices to try to drive competitors from the market. Because low prices are generally pro-competitive and beneficial to consumers, US law imposes rigorous requirements to sustain a predatory pricing claim. Specifically, a plaintiff must prove that the defendant's prices are below cost, and there is a 'dangerous probability' that – by raising its prices above competitive levels after driving competitors from the market – the defendant will recoup the losses it incurs by charging below-cost prices.39 The US Supreme Court has not specified the precise measure of cost that should be used in this analysis, although most lower courts have required pricing below some measure of incremental cost.
A price squeeze or margin squeeze is when a firm that is active in upstream and downstream markets charges high prices for the upstream input and low prices for the downstream product. The potential antitrust concern is that a downstream competitor that is not vertically integrated must therefore pay high prices for an input while charging low prices to compete downstream. However, US law does not recognise price-squeeze claims without either an upstream duty to deal with competitors or downstream predatory pricing.40
Exclusive dealing can have many pro-competitive benefits, including encouraging investment by reducing uncertainty about future sales, encouraging relationship-specific investments, and encouraging better product promotion and related services. However, exclusive dealing can also have anticompetitive effects when it forecloses rivals from the market and impairs their competitiveness. Under US law, exclusive dealing cannot be anticompetitive unless it forecloses a 'substantial share' of the relevant market.41 What counts as 'substantial' is unsettled: some courts have suggested that foreclosure of 30 per cent or less may suffice, while others have suggested that 40 to 50 per cent may be required.42 Courts have also suggested that the foreclosure required to sustain a claim may be somewhat lower where the defendant is a monopolist.43
Loyalty conditions are when a seller charges customers one price if the customer purchases a certain percentage of its needs of a product from the seller and a higher price if the customer does not. Loyalty conditions can pro-competitively reduce costs, shift risk in volatile industries, or lead to efficient contracting such as by encouraging promotional or marketing efforts. However, like exclusive dealing, they can also foreclose rivals and impair their competitiveness. US law on loyalty discounts is unsettled. Some courts have applied a predatory pricing analysis, finding loyalty conditions to be potentially anticompetitive only when the resulting price is below cost.44 Other courts have applied an exclusivity analysis, finding loyalty conditions to be potentially anticompetitive whenever they foreclose a substantial share of the market.45 Some courts and regulators may also focus on the loyalty condition's effect on the incremental price of a customer's 'contestable' share that it would be willing to switch to the defendant's rivals.46
Most-favoured nation (MFN) clauses provide that a customer will receive pricing or other terms as good as those that the seller offers other customers.47 MFNs can pro-competitively help buyers obtain low prices and can help prevent opportunism when one party makes relationship-specific investments. However, MFNs can also anticompetitively limit competition by preventing new entrants from obtaining prices as low as they otherwise would have. US case law on MFNs is relatively undeveloped. However, antitrust regulators have pursued enforcement actions against MFNs, most often in healthcare.48
Tying and bundling
Tying is when a supplier conditions its sale of one product (the tying product) on the customer purchasing another product (the tied product).49 Tying can be accomplished through an absolute refusal to sell the items separately or through a price difference between the bundle and the separate items if the difference is sufficiently large that most or all customers would purchase the bundle. Tying can pro-competitively lower costs or increase the value of the items to customers, improve quality or protect goodwill, and efficiently meter consumption. On the other hand, tying may anticompetitively allow a company with monopoly power in the tying product to increase its market power in the tied product, help it protect its monopoly power in the tying product or otherwise increase its monopoly profits. A successful tying claim requires that the tying and tied items be separate products. Items are deemed separate products when customers want to buy them separately and when offering them separately is possible and efficient.50 Additionally, tying requires that the defendant have market power in the tying product.51 More recent cases have recognised the potential pro-competitive benefits of tying, although some older precedents could be read to suggest that pro-competitive justifications are inadmissible in a tying case.52 Proving that a substantial share of the relevant market is foreclosed is not a requirement for a tying claim.
Bundling is when a supplier charges one price if a customer purchases two or more products together, but charges a higher price when the products are purchased separately. Bundling can pro-competitively lower costs or increase the value of the products to customers, but raises similar potential anticompetitive concerns as tying. Bundling can also be combined with loyalty conditions, such that obtaining a lower price requires that the customer buy a certain share of its needs across multiple products from a particular company. Similar to loyalty conditions, US case law on bundling is unsettled. Some courts have ruled that bundling cannot be anticompetitive unless it results in prices that are below 'an appropriate measure' of cost.53 In applying this cost-based test, some courts have used a 'discount attribution test' that applies the entire price 'discount' across all bundled products to the standalone price of the competitive product, and then compares the resulting price to the cost of the competitive product.54 Other courts have instead found that bundling can be potentially anticompetitive whenever it forecloses a substantial share of the market.55
Exclusionary product design – where a company designs its product in a way that makes it difficult for competitors to develop compatible or interoperable products – can raise similar concerns as tying. Although exclusionary product designs can in certain circumstances be actionable,56 antitrust laws encourage innovation, and US courts are generally reluctant to second-guess product design decisions.57 Unless the product design clearly has no benefits to customers, a court is relatively unlikely to sustain an exclusionary product design claim.
Refusal to deal
US law generally does not impose a duty to deal with competitors, because the possibility of obtaining monopoly power and the ability to exclude rivals encourages investment and innovation, and because setting the terms of dealing and monitoring would be administratively burdensome. However, in limited circumstances, a refusal to deal with rivals can be anticompetitive conduct. The cases where courts have found a duty to deal generally involve the defendant ceasing a prior, voluntary and profitable course of dealing with its rivals and the defendant dealing with rivals on different terms than with non-rivals (such as where the defendant refuses to sell a product to rivals that the defendant sells at retail).58 Even when other US regulations mandate dealing between competitors, US courts generally will not find an antitrust duty to deal.
Discriminatory pricing occurs when a seller charges different customers different prices for the same product. Unless the pricing is predatory, price discrimination alone is not anticompetitive conduct. However, a separate statute called the Robinson-Patman Act, which is not specific to monopolists, prohibits discriminatory pricing in the sale of commodities where the effect may be to reduce downstream competition between customers.59 This aspect of the Robinson-Patman Act has been widely criticised, and enforcement of it is relatively rare. Although the statute requires an effect on competition, US courts typically infer that effect from the fact of differential pricing.60 Discriminatory pricing is not prohibited by the Robinson-Patman Act if the sale does not involve commodities; if the customers do not compete with one another downstream; or if the price differential is justified by differential costs, an effort to meet competitors' pricing or changing conditions.61 The Robinson-Patman Act, therefore, does not prohibit price discrimination between final consumers, as they do not compete downstream.
iv Exploitative abuses
As noted, exercising monopoly power is generally legal under US law. US law therefore does not in general recognise exploitative abuses.
A variety of other types of conduct can, in certain circumstances, support a monopolisation claim. A non-exhaustive list is discussed here.
Monopoly leveraging is using monopoly power in one market to gain an advantage in a second market. However, under US law, monopoly leveraging likely cannot support a monopolisation claim unless it involves some anticompetitive conduct (such as tying, exclusive dealing or a refusal to deal) and it helps the defendant obtain or maintain a monopoly in the second market (or creates a dangerous probability of doing so).62
Monopolisation claims have been brought against patent holders for abusing standard-setting processes. Such claims might be brought where the patent holder induces a standard-setting organisation to adopt a standard that includes its patents but either deceptively promises to license the patents on FRAND terms and reneges or fails to disclose the existence of its patents in the first place. The concern is that such abuses may result in monopoly pricing that otherwise could have been avoided. Some courts have allowed such claims to go forward, while others have suggested they do not constitute monopolisation.63 The FTC has also used Section 5 of the FTC Act to pursue enforcement actions against alleged abuses of the standard-setting process.64
Monopolisation claims can also be brought against companies that abuse government processes. For example, 'sham' litigation and other abuses of the litigation process can be monopolisation.65 Similarly, enforcing intellectual property rights obtained through fraud can be monopolisation.66 Other abuses of governmental processes are also possible.67
'Reverse payment' settlements – that is, payments made by a branded drug manufacturer to a generic competitor as part of a patent settlement that can delay generic entry – can also be challenged as monopolisation in some situations.68 The FTC has pursued several enforcement actions against these types of settlements and there has also been private litigation.
Additionally, in extreme cases, more general tortious conduct can support a monopolisation claim. For example, one US court allowed a monopolisation claim when a defendant removed its rival's products and advertising from retail stores without permission.69
Mergers that help obtain or maintain a monopoly can constitute monopolisation, although mergers are typically challenged under Section 7 of the Clayton Act, 15 USC Section 18, which prohibits mergers that 'substantially … lessen competition' or 'tend to create a monopoly'.
Remedies and sanctions
Available remedies in monopolisation cases include injunctive relief and monetary damages.70 Civil fines are not available.
Both the US antitrust regulators and private plaintiffs can seek injunctive relief, a court order that either requires the defendant to take certain actions or prohibits the defendant from taking certain actions. Injunctive relief has multiple purposes, including stopping the anticompetitive conduct, reversing its anticompetitive effects and denying the defendant the fruits of that conduct.71 Courts have broad discretion to frame appropriate injunctive relief to achieve these goals. Appropriate relief may include structural remedies (such as dissolving or splitting the defendant or requiring divestitures) or behavioural remedies (such as prohibiting the defendant from engaging in certain activities in the future or requiring that the defendant grant rivals access to certain property). Moreover, injunctive relief can include monetary equitable remedies such as disgorgement (an order requiring the defendant give up supra-competitive profits related to the antitrust violation) or restitution (an order requiring that the defendant compensate victims for their losses). However, a plaintiff must show that the defendant is violating or is about to violate the law in order to obtain injunctive relief; simply showing past conduct and a likelihood of recurrence are insufficient.72
Private plaintiffs can seek monetary damages equal to three times their actual injury, plus litigation costs and reasonable attorneys' fees, as detailed below.73 US and state governments also can seek treble damages for injury to their own business or property (as can foreign governments, although they are usually limited to single damages).74 In addition, a US state can bring a parens patriae action seeking treble damages on behalf of its residents.75
Monopolisation enforcement principally occurs through government investigations by the US antitrust regulators, and court proceedings initiated by the US antitrust regulators, states or private plaintiffs.
Investigations by US antitrust regulators can start in a variety of ways, including the regulator's own initiative, complaints from private parties or requests from other governmental actors (e.g., Congress). The DOJ and the FTC can work voluntarily with the target of the investigation and third parties, or can use compulsory process, including subpoenas and 'civil investigative demands', to obtain documents, written responses to questions and witness testimony.76 Entities subjected to a compulsory process often seek to negotiate the scope of the discovery and sometimes seek to quash it,77 although in practice doing so is relatively difficult, particularly for a target of an investigation. An investigation can be dropped at any time, and that decision is unreviewable by a court. An investigation can also be resolved through settlement at any time. The DOJ, as an agency of the US executive branch, must obtain court approval of its settlements, while the FTC, as an independent administrative agency, must approve settlements by majority vote of the FTC Commissioners.
An investigation can also lead to litigation. The DOJ must pursue litigation in federal court, following the procedures described below. The FTC, by contrast, has its own administrative courts, with somewhat different procedures, followed first by an appeal to the Commission itself and then an appeal to a federal appellate court. The FTC can also bring lawsuits in federal court seeking equitable relief but, as noted above, one recent case held that the FTC did not have authority to pursue equitable relief in federal court for conduct that was solely in the past.
Court proceedings in a monopolisation case are similar to court proceedings in other cases. US federal courts have exclusive jurisdiction to hear cases under the federal antitrust laws, although state courts can hear cases under state antitrust laws.78 Antitrust cases that seek monetary damages are generally tried before a jury, while antitrust cases that seek only injunctive relief are instead tried before a judge. A court case starts with the plaintiff filing a complaint laying out the allegations against the defendant. The defendant can move to dismiss a complaint on several grounds, most importantly that the allegations fail to state a plausible claim. If the case proceeds, parties engage in potentially wide-ranging discovery, including document production, written interrogatories, requests for admissions and depositions. After discovery, a party may move for summary judgment on some or all issues if no genuine dispute exists as to any material fact and, given the material facts, the party is entitled to judgment as a matter of law. During and after a trial, parties can again move for judgment as a matter of law. Adverse decisions can be appealed, although typically not until after a final judgment. In general, the parties are free to settle at any time during this process.
Both the US antitrust regulators and private plaintiffs can also seek preliminary relief prior to a full adjudication by moving for a temporary restraining order or preliminary injunction to stop the challenged conduct. Preliminary relief can only be obtained from a court. Whether preliminary relief is appropriate depends on balancing the likelihood each party will succeed on the merits with the harm to the defendant from granting the preliminary relief and the harm to the plaintiff and the public from not granting it. In general, preliminary relief is unusual in a monopolisation case.
Further, the DOJ offers a business review process and the FTC offers an advisory opinion process that may allow businesses to obtain guidance about the DOJ's or the FTC's present enforcement intentions as to certain conduct.79 Businesses must submit a written request to the DOJ or the FTC describing the conduct and provide documents and other information. The DOJ or the FTC typically will consider only requests related to proposed conduct (and thus typically will not consider requests related to conduct that is already ongoing), and they can decline to issue guidance. If the DOJ or the FTC responds, the response and request are made available publicly. The guidance is not legally binding, but in practice the DOJ and the FTC are unlikely to pursue enforcement action against a requesting party that relies on it (except in special circumstances, such as if the facts provided were inaccurate). The guidance also does not preclude private plaintiffs from challenging the proposed conduct.
As explained above, private plaintiffs can and often do seek treble damages and injunctive relief in monopolisation cases. Private actions can be brought by individual plaintiffs or through an opt-out class action that adjudicates the claims of many similarly situated plaintiffs in a single lawsuit. Class actions have additional procedural requirements that must be satisfied.80 Often, antitrust actions are viewed as amenable to resolution on a class-wide basis because many of the relevant issues will be market-wide and thus common to the class. Still, procedural hurdles remain, including demonstrating that impact can be proven on a common basis.
Typically, monopolisation suits are brought either by customers alleging that they paid more because of the reduction in competition caused by the monopolisation or by competitors alleging that they made less profit because their ability to compete was impaired. In general, indirect purchasers cannot bring claims under US federal antitrust laws, although many states allow indirect purchasers to bring claims under state antitrust laws.81
To obtain damages, a private plaintiff must establish more than the antitrust violation itself: it must also show that it was injured, that the violation was a material cause of its injury, that its injury was sufficiently closely related to the violation and that its injury resulted from an anticompetitive effect of the violation. Finally, it must prove the amount of damages.
Conceptually, the appropriate measure of damages is the difference between the plaintiff's position in the actual world and what its position would have been in the but-for world without the challenged conduct. Establishing what would have happened in the but-for world is often difficult, so courts typically require plaintiffs to prove damages only with reasonable certainty. Plaintiffs can do so by offering a rough approximation, and in practice, they typically compare the actual world to a baseline unaffected by the challenged conduct (e.g., the same market before the challenged conduct began or a similar market where the challenged conduct never occurred). Increasingly, damages are modelled using econometric techniques.
To obtain an injunction, by contrast, a private plaintiff must generally show that monetary damages would not be an adequate remedy because it cannot prove the amount of damages with reasonable certainty. The forms of injunctive relief discussed above (including behavioural and structural remedies) are in theory available to private plaintiffs.
Private enforcement also interacts with public enforcement. Private plaintiffs can encourage the government to open an investigation. If the government brings a public enforcement action and obtains a favourable judgment, that may benefit private plaintiffs by precluding the defendant from re-litigating certain issues in future private actions by providing prima facie evidence of a violation under the antitrust statutes or under more general procedural principles governing preclusion.82 In contrast, if the government chooses not to bring an action, or if it brings an action and loses, that does not prevent a future private action. A settlement likewise does not prevent a future private action and, if entered before testimony is obtained, also cannot be used as prima facie evidence of a violation. In addition, regardless of whether the government decides to bring an action, private plaintiffs can often benefit from the fruits of a government investigation, such as the discovery that the government obtains. The statute of limitations for private actions can also be suspended by a government action.
In February 2019, the FTC created a Technology Enforcement Division to monitor competition and investigate potential anticompetitive conduct in markets in which digital technology is an important dimension of competition. In explaining the decision, the then Director of the Bureau of Competition noted that '[t]echnology markets, which are rapidly evolving and touch so many other sectors of the economy, raise distinct challenges for antitrust enforcement', and explained that '[b]y centralizing our expertise and attention, the new task force will be able to focus on these markets exclusively – ensuring they are operating pursuant to the antitrust laws, and taking action where they are not'. In a similar vein, the Antitrust Division of the DOJ announced in July 2019 that it 'is reviewing whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers'.
These announcements were followed by announcements of investigations into Amazon, including interviews with small businesses that sell products on Amazon.com, and Google as well as requests to major technology companies to provide details on their recent acquisitions. These moves signal heavier scrutiny by both US antitrust enforcement agencies of technology companies and particularly larger online platforms like Google, Amazon, and Facebook.
It is unclear whether the outbreak of the covid-19 virus and its impact on the global economy will have any impact on these enforcement priorities.
1 Kenneth S Reinker and Daniel Culley are partners and Benjamin Reese is an associate at Cleary Gottlieb Steen & Hamilton LLP.
2 See Verizon Communications Inc. v. Law Offices of Curtis V Trinko LLP, 540 US 398, 407 (2004).
5 See Spectrum Sports Inc v. McQuillan, 506 US 447, 456, 459 (1993).
6 See United States v. Yellow Cab Co, 332 US 218, 225–26 (1947).
7 Criminal sanctions are also theoretically available in monopolisation cases. In practice, however, the DOJ typically pursues criminal sanctions – which include fines and imprisonment – only for horizontal cartels that engage in plainly illegal activity, such as price-fixing.
8 See FTC v. Cement Inst, 333 US 683, 691–94 (1948).
9 15 USC Sections 45, 53(b).
10 Apple Inc. v. Robert Pepper et al., 139 S. Ct. 1514 (2019).
11 Illinois Brick. Co. v. Illinois, 431 U.S. 720 (1977).
12 Findings of Fact and Conclusions of Law, FTC v. Qualcomm Inc., No. 5:17-cv-00220 (ND Cal, 21 May 2019).
13 Opening Brief for Appellant Qualcomm Incorporated, FTC v. Qualcomm Incorporated, No. 19-16122 (9th Cir., 23 August 2019), available at http://cdn.ca9.uscourts.gov/datastore/general/2019/11/20/19-16122%20-%20Opening%20brief.pdf.
15 Brief of the Federal Trade Commission, FTC v. Qualcomm Incorporated, No. 19-16122 (9th Cir., 22 November 2019), available at http://cdn.ca9.uscourts.gov/datastore/general/2020/02/27/19-16122-Answering%20brief.pdf. Compare with Broadcom v. Qualcomm, 501 F.3d 297 (3d Cir. 2007) (holding that a monopolist's failure to comply with a FRAND promise for its standard-essential patents violated Section 2 of the Sherman Act).
16 Id. (citing United States v. Microsoft, 56 F.3d 1448, 1452, 1462 (D.C. Cir. 1995)).
17 Brief for the United States of America as Amicus Curiae in Support of Appellant and Vacatur, FTC v. Qualcomm Incorporated, No. 19-16122 (9th Cir., 30 August 2019), available at http://cdn.ca9.uscourts.gov/datastore/general/2019/11/20/19-16122%20-%20United%20States%20amicus%20brief.pdf.
20 Complaint for Injunctive and Other Equitable Relief, FTC v. Surescripts, LLC, No. 1:19-cv-01080-JDB (D.D.C., 17 April 2019).
21 Memorandum Opinion, FTC v. Surescripts, LLC, No. 1:19-cv-01080-JDB (D.D.C., 17 January 2020).
23 FTC, Reckitt Benckiser Group plc to Pay $50 Million to Consumers, Settling FTC Charges that the Company Illegally Maintained a Monopoly over the Opioid Addiction Treatment Suboxone, 11 July 2019, available at https://www.ftc.gov/news-events/press-releases/2019/07/reckitt-benckiser-group-plc-pay-50-million- consumers-settling-ftc
24 Complaint for Injunctive and Other Equitable Relief, FTC v. Reckitt Benckiser Group PLC, No. 1:19-CV-00028 (W.D. Va. 2018), available at https://www.ftc.gov/system/files/documents/cases/reckitt_complaint_7-11-19.pdf.
27 Memorandum Opinion and Order, In re: Suboxone (Buprenorphine Hydrochloride and Nalaxone) Antitrust Litigation, MDL No. 2445, 13-md-2445 (E.D. Pa. 2019).
28 Joint Motion for Entry of Stipulated Order for Permanent Injunction and Equitable Monetary Relief, FTC v. Reckitt Benckiser Group PLC, No. 1:19-CV-00028 (W.D. Va. 2018), available at https://www.ftc.gov/system/files/documents/cases/reckitt_joint_
29 Memorandum Opinion and Order, In re: Suboxone (Buprenorphine Hydrochloride and Nalaxone) Antitrust Litigation, MDL No. 2445, 13-md-2445 (E.D. Pa. 2019).
30 See, for example, United States v. EI DuPont de Nemours & Co, 351 US 377, 391–92 (1956).
31 See, for example, Domed Stadium Hotel Inc. v. Holiday Inns Inc., 732 F 2d 480, 489 (Fifth Circuit 1984) ('Supreme Court cases, as well as cases from this court, suggest that absent special circumstances, a defendant must have a market share of at least fifty percent before he can be guilty of monopolization.').
32 US law does not recognise 'relative dominance' or 'collective dominance'.
33 See, for example, Brown Shoe Co v. United States, 370 US 294, 325 (1962); DuPont, 351 US at 395.
34 See, for example, Tampa Elec Co v. Nashville Coal Co, 365 US 320, 327–28 (1961).
35 Cf Horizontal Merger Guidelines, US Dep't of Justice and the Federal Trade Commission Section 4.1.1 (19 August 2010) (describing similar approach in merger context using prevailing prices as baseline).
36 See, for example, United States v. Grinnell Corp, 384 US 563, 570–71 (1966).
37 Press release, US Dep't of Justice Office of Public Affairs, 'Justice Department Withdraws Report on Antitrust Monopoly Law' (11 May 2009), available at www.justice.gov/opa/pr/2009/May/09-at-459.html.
38 Ohio v. American Express Co., 138 S. Ct. 2274 (2018).
39 See Brooke Group Ltd v. Brown & Williamson Tobacco Corp, 509 US 209, 222–24 (1993). In a predatory pricing claim based on price discrimination brought under the Robinson-Patman Act, 15 USC Section 13, a plaintiff must prove a 'reasonable prospect' of recoupment. id., at 224.
40 See Pacific Bell Telephone Co v. linkLine Communications Inc., 555 US 438 (2009).
41 Tampa Electric Co v. Nashville Coal Co, 365 US 320, 327 (1961).
42 Compare Twin City Sportservice Inc v. Charles O Finley & Co Inc, 676 F 2d 1291, 1298, 1304 (Ninth Circuit 1982) (finding substantial foreclosure where defendant 'controlled 24 per cent' of the market), with Stop & Shop Supermarket Co v. Blue Cross & Blue Shield of RI, 373 F 3d 57, 68 (First Circuit 2004) (foreclosure is 'unlikely to be of concern where they are less than 30 or 40 per cent'), with United States v. Microsoft Corp, 253 F 3d 34, 70 (DC Cir 2001) (en banc) ('roughly 40 per cent or 50 per cent share usually required' for an unreasonable restraint of trade claim).
43 See Microsoft, 253 F 3d at 70.
44 See, for example, Concord Boat Corp v. Brunswick Corp, 207 F 3d 1039, 1060–62 (Eighth Circuit 2000).
45 See, for example, LePage's Inc. v. 3M, 324 F 3d 141, 157–59 (Third Circuit 2003) (en banc).
46 See, for example, US Dep't of Justice, Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act 107 (2008) (now withdrawn).
47 For discussions of MFNs, see, for example, Baker, 'Vertical Restraints with Horizontal Consequences: Competitive Effects of “Most-Favored-Customer” Clauses', 64 Antitrust LJ 517 (1996); Salop & Scott Morton, 'Developing an Administrable MFN Enforcement Policy', 27(2) Antitrust Magazine 15 (2013).
48 See, for example, Complaint, United States v. Blue Cross Blue Shield of Michigan, No. 2:10-cv-14155-DPH-MKM (ED Mich 18 October 2010).
49 See Jefferson Parish Hospital v. Hyde, 466 US 2, 21 (1984).
50 See Eastman Kodak Co v. Image Technical Services Inc., 504 US 451, 462 (1992).
51 See Jefferson Parish, 466 US at 13–14.
52 See Ill Tool Works Inc. v. Independent Ink Inc., 547 US 28, 35 (2006).
53 See, for example, Cascade Health Solutions v. PeaceHealth, 515 F3d 883, 903 (Ninth Circuit 2008).
54 See id., at 906–08.
55 See, for example, LePage's Inc. v. 3M, 324 F 3d 141, 154–57 (Third Circuit 2003) (en banc).
56 See, for example, United States v. Microsoft Corp, 253 F 3d 34, 65 (DC Cir 2001) (en banc); CR Bard Inc. v. M3 Systems Inc., 157 F 3d 1340, 1382 (Fed Cir 1998).
57 See, for example, Berkey Photo Inc. v. Eastman Kodak Co, 603 F 2d 263, 286–87 (Second Circuit 1979).
58 See, for example, Verizon Communications Inc. v. Law Offices of Curtis V Trinko LLP, 540 US 398, 409–10 (2004); Aspen Skiing Co v. Aspen Highlands Skiing Corp, 472 US 585, 605–11 (1985).
59 15 USC Section 13.
60 See FTC v. Morton Salt Co, 334 US 37, 47 (1948).
61 15 USC Section 13(a), (b).
62 See Trinko, 540 US at 415 n. 4.
63 Compare Broadcom Corp v. Qualcomm Inc., 501 F 3d 297 (Third Circuit 2007) (allowing claim for breach of FRAND commitments), with Rambus Inc. v. FTC, 522 F 3d 456, 462 (DC Cir 2008) (not allowing such a claim).
64 See, for example, In re Negotiated Data Solutions, File No. 051-0094, slip op at 2 (FTC 23 January 2008) (Statement of the Commission), available at www.ftc.gov/os/caselist/0510094/080122statement.pdf.
65 See, for example, Professional Real Estate Investors Inc. v. Columbia Pictures Industries Inc., 508 US 49, 60–61 (1993) (holding that sham litigation requires both objective and subjective baselessness); California Motor Transport Co v. Trucking Unlimited, 404 US 508 (1972) (allowing claims based on abuse of the litigation process through repetitive lawsuits).
66 See, for example, Walker Process Equip v. Food Mach & Chem Corp, 382 US 172 (1965).
67 Findings of Fact and Conclusions of Law, FTC v. AbbVie Inc., No. 2:14-cv-05151-HB (ED Pa 2018), available at https://www.ftc.gov/system/files/documents/cases/abbvie_
68 See FTC v. Actavis, 133 S Ct 2223, 2227 (2013) (holding that reverse payment settlements 'can sometimes violate the antitrust laws').
69 See Conwood Co v. United States Tobacco Co, 290 F 3d 768, 783–84 (Sixth Circuit 2002).
70 As noted, criminal sanctions are theoretically available but not pursued in practice.
71 See, for example, United States v. United Shoe Mach Corp, 391 US 244, 250 (1968).
72 FTC v. Shire ViroPharma Inc, 917 F.3d 147 (3rd Cir. 2019), available at https://www2.ca3.uscourts.gov/opinarch/181807p.pdf.
73 15 USC Section 15.
74 15 USC Section 15(b); 15a.
75 15 USC Section 15c.
76 See 15 USC Sections 46, 49, 57b-1; 15 USC Sections 1311–1314.
77 See 15 USC Section 1314(b); 16 CFR 2.7(d).
78 See General Investment Co v. Lake Shore & Mich S Ry Co, 260 US 261, 286–88 (1922).
79 See 16 CFR Sections 1.1–1.4; 28 CFR Section 50.6.
80 See Fed R Civ P 23.
81 See Illinois Brick Co v. Illinois, 431 US 720 (1977); California v. ARC America Corp, 490 US 93 (1989).
82 See 15 USC Section 16(a).
83 FTC, FTC's Bureau of Competition Launches Task Force to Monitor Technology Markets, 26 February 2019, available at https://www.ftc.gov/news-events/press-releases/2019/02/ftcs-bureau-competition-launches- task-force-monitor-technology.
84 DOJ, Justice Department Reviewing the Practices of Market-Leading Online Platforms (23 July 2019), available at: https://www.justice.gov/opa/pr/justice-department-reviewing-practices-market-leading- online-platforms.