The Essence of an Antitrust Violation

Abstract

Judicial embrace of the consumer welfare standard reduced the indeterminacy and political manipulability of U.S. antitrust law. Continual invocations of antitrust’s consumer welfare focus, however, have created the misimpression that consumer harm is a sufficient, not merely a necessary, condition for condemning antitrust-relevant behaviors like agreements in restraint of trade and exclusion-causing unilateral acts. Such a “consumer harm sufficiency” view underlay the plaintiffs’ claims in Epic Games v. Apple and FTC v. Qualcomm and has inspired scholarly proposals to condemn various antitrust-relevant behaviors simply because they occasion consumer harm.

Antitrust economics and dynamic efficiency considerations call for rejection of the consumer harm sufficiency view in favor of an approach that condemns antitrust-relevant conduct only when it (1) enhances the surplus-extractive power of the defendant or its co-conspirator (2) by weakening competitive constraints and (3) is not reasonably necessary to secure efficiencies sufficient to produce a net increase in market output. This Article contends that these three components collectively comprise the essence of an antitrust violation and are each necessary for condemnation of antitrust-relevant conduct.

This view, termed “antitrust essentialism,” is consistent with every major antitrust liability rule except one: the rule of per se liability for certain tying arrangements. The justification offered for condemning tie-ins that do not involve all three essential elements is that they may nevertheless reduce consumer welfare, an argument that embraces the consumer harm sufficiency view.

To reconcile its inconsistent caselaw, ensure that antitrust doctrine optimally protects consumer welfare, and reduce the administrative costs of antitrust litigation, the U.S. Supreme Court should (1) abandon the per se rule against certain tie-ins in favor of a rule of reason that requires substantial tied market foreclosure, a standard consistent with antitrust essentialism; (2) expressly declare that antitrust liability requires the three elements catalogued above; (3) allocate proof burdens on the elements, with the plaintiff having the burden to plead and prove the first two and the defendant having the initial burden to show an absence of the third; and (4) impose a generally applicable “market power enhancement” requirement akin to the existing antitrust injury requirement. Such an antitrust essentialist approach would have led to swift disposition of misguided and costly cases like Epic Games and Qualcomm and would resolve a pending circuit split concerning liability for misrepresentation in the standard-setting process.

Keywords: antitrust, consumer welfare standard, Sherman Act, Neo-Brandeisian, monopolization, market power, monopoly, tying, Epic Games, Qualcomm, Broadcom, Rambus

JEL Classification: K00, K20, K21, L00, L12, L40, L41, L42, L43, L51