Saving Section 2: Reframing Monopolization Law

42 Pages Posted: 5 Dec 2005

See all articles by Tim Brennan

Tim Brennan

University of Maryland, Baltimore County - Department of Public Policy; Resources for the Future

Date Written: December 2, 2005

Abstract

Unlike collusion and merger law, monopolization doctrines have long been subject to criticism not just at enforcement margins but also at their foundations. The unfortunate distinctiveness of monopolization law rests on the premise that unlike the other branches of antitrust, Section 2 cases involve acts directed at harming rivals. Since competition also harms rivals, commentators fall into two irreconcilable camps: either Section 2 cases should bear very high if not insurmountable burdens, or that one can protect competition by protecting competitors. Attention to rivals leads to spurious monopolization screens. One, prior dominance, conflates the nature of the offender with the nature of the offense, inviting a paradox that one cannot monopolize without already having a monopoly, weakening claims that alleged abuses have competitive relevance. A second, profit sacrifice, is neither necessary nor sufficient for economic welfare to fall. Those disliking Section 2 cases can treat it as an absolute efficiency defense; those disposed to such cases can treat profit sacrifice as a sign that monopolization law is about malicious intent, not economic effect.

An alternative is to reject the focus on rivals and identify Section 2 cases as about monopolization of a related complementary market, e.g., in a production input, distribution channel, or retail outlets. Complementary market monopolization (CMM), as the necessary and sufficient condition for anticompetitive effect, avoids these spurious screens. In directing attention to whether a practice creates a new monopoly in an otherwise competitive market, CMM can employ conventional horizontal tools, e.g., merger guidelines. CMM provides a way to assess bundled discounts and illustrates important and neglected differences between static and dynamic cases. Moving to CMM, and reconciling monopolization cases with collusion and merger law, could be effected by restricting monopolization cases to only those that "create" a monopoly, deleting "or maintain a monopoly" from Section 2 jurisprudence.

Keywords: monopolization, Section 2, exclusion, bundling

JEL Classification: L41, K21, L40

Suggested Citation

Brennan, Tim, Saving Section 2: Reframing Monopolization Law (December 2, 2005). AEI-Brookings Joint Center Working Paper No. 05-27, Available at SSRN: https://ssrn.com/abstract=867106 or http://dx.doi.org/10.2139/ssrn.867106

Tim Brennan (Contact Author)

University of Maryland, Baltimore County - Department of Public Policy ( email )

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