Antitrust

The antitrust laws of the United States aim to protect consumers by maintaining competitive markets. To that end, § 1 of the Sherman Act prohibits agreements that unreasonably restrain trade by restricting production, raising prices, or otherwise manipulating markets to the detriment of consumers. See 15 U.S.C. § 1; State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997); Apex Hosiery Co. v. Leader, 310 U.S. 469, 493, 60 S.Ct. 982, 84 L.Ed. 1311 (1940). In Re Musical Instruments & Equip. Antitrust Litigation, 798 F. 3d 1186 (9th Cir. 2015).


Section 1 of the Sherman Act prohibits "[e]very contract, combination ... or conspiracy, in restraint of trade or commerce," 15 U.S.C. § 1, "though courts have long restricted its reach to agreements that unreasonably restrain trade," Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 705 (7th Cir.2011). Agreements to fix prices unambiguously fall within the ambit of § 1. Id. To prove a § 1 claim, plaintiffs must prove three things: (1) defendants had a contract, combination, or conspiracy ("an agreement"); (2) as a result, trade in the relevant market was unreasonably restrained; and (3) they were injured. Id. In Re Dairy Farmers of America, Inc., 801 F. 3d 758 (7th Cir. 2015).

"To show concerted action, antitrust plaintiffs must produce evidence that would allow a jury to infer that the alleged conspirators 'had a conscious commitment to a common scheme designed to achieve an unlawful objective.'" Id. at 706 (quoting Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984)). The evidence must "reveal 'a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement.'" Id. (quoting Am. Tobacco Co. v. United States, 328 U.S. 781, 810, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946)). In Re Dairy Farmers of America, Inc., ibid.


The Sherman Antitrust Act is based on an often-difficult distinction between concerted and independent, unilateral action. Concerted activity is scrutinized more closely than unilateral behavior because "'[c]oncerted activity inherently is fraught with anticompetitive risk' insofar as it 'deprives the marketplace of independent centers of decisionmaking that competition assumes and demands.'" Am. Needle, 560 U.S. at 190 (quoting Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 768-69 (1984)). Specifically, Section 1 regulates concerted activity between two or more entities, outlawing "[e]very contract, combination . . . or conspiracy, in restraint of trade," 15 U.S.C. § 1, a provision that has subsequently been limited to target only "unreasonable" restraints of trade. To prevail on a claim under § 1, a plaintiff must prove: (1) a contract, combination, or conspiracy; (2) producing adverse, anticompetitive effects in the relevant market; and (3) resulting in injury. See Expert Masonry, Inc. v. Boone Cty., Ky., 440 F.3d 336, 342 (6th Cir. 2006). The Medical Center At Elizabeth Place, LLC v. Atrium Health System, (6th Cir. 2016).

Section 2 of the Sherman Act makes it an offense to "monopolize, or attempt to monopolize . . . any part of the trade or commerce among the several States." 15 U.S.C. § 2; see also Geneva Pharm. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485, 495 (2d Cir.2004). To establish monopolization in violation of § 2, a plaintiff must prove not only that the defendant possessed monopoly power in the relevant market, but that it willfully acquired or maintained that power "as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407, 124 S.Ct. 872, 157 L.Ed.2d 823 (2004) (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966)). "To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct." Id. In order to show attempted monopolization, the plaintiff must prove: "(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power." Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993). Attempted monopolization, unlike monopolization, requires a finding of specific intent. See, e.g., Delaware & Hudson Ry. Co. v. Consol. Rail Corp., 902 F.2d 174, 180 (2d Cir.1990). New York ex rel. Schneiderman v. Actavis plc, 787 F. 3d 638 (2nd Cir. 2015).


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To survive a motion to dismiss, a Sherman Act claim must "(1) define the relevant geographic market, (2) allege an antitrust injury, and (3) allege conduct in violation of antitrust laws." New York Medscan LLC v. N.Y. Univ. Sch. Of Med., 430 F. Supp. 2d 140, 145 (S.D.N.Y. 2015). In such actions, the relevant market is the "'area of effective competition' within which the defendant operates." AD/SAT, Div. of Skylight, Inc. v. Assoc. Press, 181 F.3d 216, 227 (2d Cir. 1999) (quoting Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327-28 (1961)). That is, a market consists of an area where sellers, "if unified by a hypothetical cartel or merger, could profitably raise prices significantly above the competitive level." Id. at 228. Concord Associates, LP v. Entertainment Properties Trust, (2nd Cir. 2016).

For antitrust purposes, the concept of a market has two components: a product market and a geographic market. Bayer Schering Pharma AG v. Sandoz, Inc., 813 F. Supp. 2d 569, 574 (S.D.N.Y 2011). "A relevant product market consists of 'products that have reasonable interchangeability for the purposes for which they are produced—price, use and qualities considered.'" PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101, 105 (2d Cir. 2002) (per curiam) (quoting United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404 (1956)). By contrast, "the geographic market analysis seeks to identify the precise geographic boundaries of effective competition in order to reach a more informed conclusion on potential harm to the market." Mathias v. Daily News, L.P., 152 F.Supp.2d 465, 480 (S.D.N.Y. 2001). "Courts generally measure a market's geographic scope, the 'area of effective competition,' by determining the areas in which the seller operates and where consumers can turn, as a practical matter, for supply of the relevant product." Heerwagen v. Clear Channel Commc'ns, 435 F.3d 219, 227 (2d Cir. 2006) (citation omitted), overruled on other grounds by Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196, 201 (2d Cir. 2008). Concord Associates, LP v. Entertainment Properties Trust, ibid.

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A tying arrangement is "defined as an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product." N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5 (1958). Tying suppresses competition in two ways: "First, the buyer is prevented from seeking alternative sources of supply for the tied product; second, competing suppliers of the tied product are foreclosed from that part of the market which is subject to the tying arrangement." Advance Bus. Sys. & Supply Co. v. SCM Corp., 415 F.2d 55, 60 (4th Cir. 1969). It's My Party, Inc. v. Live Nation, Inc., (4th Cir. 2016).

What causes these anticompetitive harms and distinguishes tying from ordinary market behavior is not the mere bundling of two products together but rather the coercion of the consumer. As the Supreme Court put it, the crux of tying lies in "the seller's exploitation of its control over the tying product to force the buyer into the purchase of a tied product that the buyer either did not want at all, or might have preferred to purchase elsewhere on different terms." Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 12 (1984), abrogated on other grounds by Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006) (emphasis added); accord Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Applications ¶ 1700i (3d ed. 1995) (deducing from longstanding case law that "no tie exists unless the customer was 'coerced' into taking both products"). If instead the buyer is free to decline the tied product or to purchase the two products separately, then by definition there is no unlawful tying. See Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 614 (1953) (stressing the importance of a "forced purchase"); Stephen Jay Photography, Ltd. v. Olan Mills, Inc., 903 F.2d 988, 991 (4th Cir. 1990) (same). It's My Party, Inc. v. Live Nation, Inc., ibid.

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Predatory pricing occurs when a defendant "sacrifice[s] present revenues for the purpose of driving [a competitor] out of the market with the hope of recouping the losses through subsequent higher prices." Int'l Air Indus., Inc. v. Am. Excelsior Co., 517 F.2d 714, 723 (5th Cir. 1975). Most courts analyze predatory pricing claims as "an attempt by the defendant to preserve or extend its monopoly power" under section 2 of the Sherman Act. IIIA PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 724, at 36 (3d ed.2008). That points to an unusual feature of this case. It is unclear which defendant is alleged to be the attempted monopolist or if they both are. [Footnote omitted.] The typical predatory pricing case is brought solely against the plaintiff's competitor who is allegedly selling at low prices in order to increase market share by driving the plaintiff out of the market. See, e.g., Stearns, 170 F.3d 518 (suit brought by manufacturer of airplane jet bridges against competitor alleging exclusionary manipulation of municipal bids and predatory pricing); Stitt Spark Plug Co. v. Champion Spark Plug Co., 840 F.2d 1253 (5th Cir.1988) (suit brought by spark plug company against other spark plug company alleging anticompetitive practices including predatory pricing); Adjusters Replace-A-Car, Inc. v. Agency Rent-A-Car, Inc., 735 F.2d 884 (5th Cir.1984) (suit by rental car company accusing competitor of employing predatory pricing in two cities in attempt to monopolize). Felder's Collision Parts v. All Star Adver. Agency, 777 F. 3d 756 (5th Cir. 2015).

Low prices benefit consumers and are usually the product of the competitive marketplace that the antitrust laws are aimed at promoting. Brooke Grp., 509 U.S. at 223, 113 S.Ct. 2578 ("Low prices benefit consumers regardless of how those prices are set, and so long as they are above predatory levels, they do not threaten competition.") (quoting Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 340, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990)). The Supreme Court has thus emphasized that a predatory pricing claim should go forward only when the defendant is pricing below its costs because "the exclusionary effect of prices above a relevant measure of cost either reflects the lower cost structure of the alleged predator, and so represents competition on the merits, or is beyond the practical ability of a judicial tribunal to control without courting intolerable risks of chilling legitimate price-cutting." Brooke Grp., 509 U.S. at 223, 113 S.Ct. 2578 (citing AREEDA & HOVENKAMP ¶¶ 714.2, 714.3). Felder's Collision Parts v. All Star Adver. Agency, ibid.

THIS CASEBOOK contains a selection of 180 U. S. Court of Appeals decisions that analyze, discuss and interpret antitrust doctrine. The selection of decisions spans from 2004 to the date of publication.