Today the ABA Antitrust Law Section’s annual Spring Meeting comes to a close. This post reviews a panel discussion on the particular challenges of trying a monopolization or attempt to monopolize case under Sherman Act Section 2.

Ian Simmons, O’Melveney & Myers: Antitrust enforcement agencies have shown new interest in bringing cases under Section 2. Today we’ll discuss best practices for trying a Section 2 case to a judge or jury.

The simplicity and brevity of Section 2’s language have notoriously produced a thicket of complex doctrinal analysis in the courts. Who benefits from that?

Doug Melamed, Stanford Law School: Antitrust law’s complexity favors defendants, but antitrust cases all come down to two questions—did the defendant engage in anticompetitive conduct, and did the conduct increase monopoly or market power? Judges have grown conservative about antitrust.

Simmons: Courts prescribe a 5-part test. How do you reconcile that with your two steps?

Melamed: In United States v. Microsoft, the focus stayed on roadblocks Microsoft erected. Courts do apply a multi-step rule, but the steps collapse into the big two questions.

Simmons: How does the complexity affect how you try cases?

John Roberti, Cohen & Gresser: Section 2 cases confront a mass of case law that judges must follow, but judges take account of news and developing ideas. The fact of growing government interest in section 2 reflects a positive development that may influence judicial thinking.

Simmons: Let’s talk about the consumer welfare standard (CWS). CWS posits that Congress passed antitrust statutes to protect consumer welfare. What do you tell judges antitrust law aims to do?

Bonny Sweeney, Antitrust Division: CWS started with Robert Bork.* People use it to underenforce antitrust. It focuses on short-term price and output effects. That approach omits providers like farmers and workers. Proponents answer that you can still use CWS for them, but CWS framing still causes problems. It causes courts to err in defining relevant markets, for instance. Antitrust concerns competition and the competitive process, not a tally of consumer welfare.

Simmons: CW feels hard to grasp, but a marketplace realities test seems intuitive and easy.

Sweeney: Courts say you must consider market realities, but CWS causes them to focus on short-term price and output effects.

Christopher Yoo, University of Pennsylvania Law School: Jonathan Baker, who wrote The Antitrust Paradigm, favors more vigorous enforcement. A more structural approach also vies with CWS for recognition. Alternatives to CWS provide a broader perspective now, with more attention to quality and to quantity. The big elephant in the room is innovation. We need better tools to analyze innovation effects. 

Melamed: In defense of CWS, Bork spoke of consumer welfare when he meant total welfare. CWS really means to protect loss of economic welfare due to increases in market power. Harm consists in higher prices or lower quality, less quantity, or weaker innovation.

Market power reduces dominant firms’ incentives to innovate. But let’s not toss out CWS. Let’s instead rename it.

Simmons: We hear the mantra that antitrust concerns competition and not competitors. That seems odd. Shouldn’t we care about competitors?

Melamed: We do consider harm to competitors, but the law focuses on how market power disadvantages competition.

Yoo: We care about market structure, but now we can measure performance directly. We look at effects instead of structure. We rejected no-fault monopolization to reward innovation, but structure still matters.

Melamed: I agree structure matters to public policy, but antitrust law focuses on conduct instead of structure.

Sweeney: Consumers give tech companies their personal data and attention and lose privacy, and they therefore pay for tech services. Monopoly power suppresses firms’ incentive to innovate whether they “charge” a price or not.

Simmons: How do you explain that free stuff has a positive cost?

Roberti: You must stress that services don’t come free.

Yoo: We’ve seen this before. We had free TV in our homes, but ads on TV cost the advertisers. Nominally free tech services have costs too.

Simmons: The Supreme Court might have done antitrust plaintiffs a favor by positing the “two-sided market” concept, which makes you think of the total cost of both sides of the market.

Exclusionary conduct seems squishy. How can you distinguish between lawful exclusion and the unlawful kind?

Melamed: Exclusionary conduct tends to exclude and weaken rivals but is not necessary to increase welfare. Hard question comes with what do you do with conduct that does both. Balancing has problems conceptually. Courts avoid the hard issue.

Simmons: The idea of preferring a less restrictive way to achieve an increase in welfare exists in doctrine. The ex post judicial management of what counts as a less restrictive alternative worries me.

Roberti: You must tell a story. The story says the conduct didn’t need to happen to get positive effects.

Yoo: I see that as a big problem, too. The notion of vertical mergers that eliminate double marginalization presents an instance of potentially exclusionary conduct that inherently confers benefits, but the question remains whether anyone other than the acquirer reaps the benefits of that elimination. 

Roberti: You need to explain why conduct does or doesn’t improve welfare in a necessary way.

Simmons: What role does intent play for monopolies?

Sweeney: Intent as a formal matter doesn’t count except in attempt to monopolize cases, but courts say intent helps make conduct understandable. It provides narrative. Helpful facts characterize conduct as good or bad. The same conduct could go either way. You must look at conduct as a whole.

Simmons: D.C. Circuit says intent may cast light on effect of conduct. Don’t you have to focus on intent to impair competition?

Yoo: Intent helps you understand the scheme. You need a hot document, but you still need to show effects.

Roberti: Evidence to show why someone acted in a certain way.

Melamed: Intent evidence helps, but at the same time it lacks materiality.

Simmons: Impairing opportunities of rivals. 

Yoo: Refusal to deal impairs rivals, but impairing rival doesn’t suffice. 

Simmons: How can you show lack of innovation?

Melamed: You don’t usually have to show harm to innovation. More market power increases inference of loss to innovation. 

Simmons: John Gaddis Smith speaks of lumpers and splitters. Plaintiffs lump, defendants split.

Sweeney: Defendants always split. Law says you must look at conduct as whole. 

Yoo: Statute says lump, but courts say split.

[Problem consists in need of plaintiffs to disturb the status quo. The disturber must justify changing the world. Antitrust violation makes moral judgment.]

Melamed: Antitrust condemns bad conduct. You must find anticompetitive conduct. 

Simmons: The Trinko case** broods over Section 2 cases. Does that explain the rarity of Section 2 enforcement actions?

Melamed: Trinko involved a simple issue, but Justice Scalia used it to express a broad principle. 

Roberti: Enforcers haven’t brought criminal Section 2 cases because of having to prove the intent element. 

Simmons: A Section 2 case should succeed if you show the conduct “may” have a negative effect on competition.

Melamed: Antitrust law tolerates incremental enhancements of market power.

Yoo: Courts worry about the practical ability to predict the but-for world.

Simmons: Judgment happens in retrospect.

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*Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1979).

**Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, 540 U.S. 398 (2004).