U.S. Supreme Court Rejects Price Squeeze Claim: A High Point for Divergence between US and European Law?

Abstract:     
The US Supreme Court’s decision in Pacific Bell Telephone Co. v. LinkLine Communications rejected price squeeze claims brought under Section 2 of the Sherman Act. In support of this holding, the majority cited concerns with maintaining a monopolist’s freedom of action necessary to promote competition and innovation. The Court majority also stressed the difficulties of administering a price squeeze test. The author challenges the Court’s reasoning on each of these points. The monopolist’s duty to deal in this case was unchallenged, as was the exclusionary effects of it’s behavior. The Court’s rejection of the price squeeze claim came at the expense of the underlying consumer welfare goals of the Sherman Act. The Court also turned aside an opportunity to adopt a workable price transfer test for assessing price squeezes by a dominant, vertically integrated firm, the same test that the European Commission applied in the Deutsche Telecom case. The LinkLine Court’s decision is consistent with a line of ideological decisions that are often poorly anchored to the facts of the case being decided.

Number of Pages in PDF File: 27

Keywords: Antitrust law, Sherman Act, Exclusionary Conduct, Price Squeeze Claims

JEL Classification: K21, L41

working papers series