Opinion ID: 368855
Heading Depth: 3
Heading Rank: 2

Heading: The Requirement of Anticompetitive Conduct

Text: 35 Despite the generally recognized evils of monopoly power, it is well settled, See J. von Kalinowski, Antitrust Laws & Trade Regulation P 802(3), at 8-41 (1979), that § 2 does not prohibit monopoly Simpliciter or, as the Supreme Court phrased it in the early landmark case of Standard Oil Co. of New Jersey, supra, 221 U.S. at 62, 31 S.Ct. 502, monopoly in the concrete. 36 Thus, while proclaiming vigorously that monopoly power is the evil at which § 2 is aimed, courts have declined to take what would have appeared to be the next logical step declaring monopolies unlawful Per se unless specifically authorized by law. To understand the reason for this, one must comprehend the fundamental tension one might almost say the paradox that is near the heart of § 2. This tension creates much of the confusion surrounding § 2. It makes the cryptic Alcoa opinion a litigant's wishing well, into which, it sometimes seems, one may peer and find nearly anything he wishes. 37 The conundrum was indicated in characteristically striking prose by Judge Hand, who was not able to resolve it. Having stated that Congress did not condone 'good trusts' and condemn 'bad' ones; it forbad all, Alcoa, supra, 148 F.2d at 427, he declared with equal force, The successful competitor, having been urged to compete, must not be turned upon when he wins, Id. at 430. Hand, therefore, told us that it would be inherently unfair to condemn success when the Sherman Act itself mandates competition. Such a wooden rule, it was feared, might also deprive the leading firm in an industry of the incentive to exert its best efforts. Further success would yield not rewards but legal castigation. The antitrust laws would thus compel the very sloth they were intended to prevent. We must always be mindful lest the Sherman Act be invoked perversely in favor of those who seek protection against the rigors of competition. E.g., Buffalo Courier-Express, Inc. v. Buffalo Evening News, Inc., 601 F.2d 48 (2d Cir. 1979). 38 In Alcoa the crosscurrents and pulls and tugs of § 2 law were reconciled by noting that, although the firm controlled the aluminum ingot market, it may not have achieved monopoly; monopoly may have been thrust upon it. 148 F.2d at 429. In examining this language, which would condemn a monopolist unless it is the passive beneficiary of a monopoly, Id. at 430, we perceive Hand the philosopher. As an operative rule of law, however, the thrust upon phrase does not suffice. It has been criticized by scholars, 3 P. Areeda & D. Turner, Supra, at 20; L. Sullivan, Supra, at 96-97; Handler, Some Unresolved Problems of Antitrust, 62 Colum.L.Rev. 930, 934 (1962), and the Supreme Court appears to have abandoned it. See United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966); 1 M. Handler, Supra, at 692. Grinnell instructs that after possession of monopoly power is found, the second element of the § 2 offense is the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. 384 U.S. at 570-71, 86 S.Ct. at 1704. 39 This formulation appears to square with the understanding of the draftsmen of the Sherman Act that § 2 does not condemn one who merely by superior skill and intelligence . . . got the whole business because nobody could do it as well. United Shoe Machinery Corp., supra, 110 F.Supp. at 341 (quoting legislative history). Thus the statement in Alcoa that even well-behaved monopolies are forbidden by § 2 must be read carefully in context. Its rightful meaning is that, if monopoly power has been acquired or maintained through improper means, the fact that the power has not been used to extract improper benefits provides no succor to the monopolist. 40 But the law's hostility to monopoly power extends beyond the means of its acquisition. Even if that power has been legitimately acquired, the monopolist may not wield it to prevent or impede competition. Once a firm gains a measure of monopoly power, whether by its own superior competitive skill or because of such actions as restrictive combinations with others, it may discover that the power is capable of being maintained and augmented merely by using it. E. g., Lorain Journal Co. v. United States, 342 U.S. 143, 72 S.Ct. 181, 96 L.Ed. 162 (1951). That is, a firm that has achieved dominance of a market might find its control sufficient to preserve and even extend its market share by excluding or preventing competition. A variety of techniques may be employed to achieve this end predatory pricing, lease-only policies, and exclusive buying arrangements, to list a few. 41 Even if the origin of the monopoly power was innocent, therefore, the Grinnell rule recognizes that maintaining or extending market control by the exercise of that power is sufficient to complete a violation of § 2. As we have explained, only considerations of fairness and the need to preserve proper economic incentives prevent the condemnation of § 2 from extending even to one who has gained his power by purely competitive means. The district court judge correctly indicated that such a monopolist is tolerated but not cherished. Thus, the rule of Grinnell must be read together with the teaching of Griffith, that the mere existence of monopoly power whether lawfully or unlawfully acquired, is in itself violative of § 2, provided it is coupled with the purpose or intent to exercise that power. 334 U.S. at 107, 68 S.Ct. at 945. 42 The key to analysis, it must be stressed, is the concept of market power. Although power may be derived from size, E. g., United States v. Swift & Co., 286 U.S. 106, 116, 52 S.Ct. 460, 76 L.Ed. 999 (1932), the two are not identical. F. Scherer, Supra, at 352. A firm that has lawfully acquired a monopoly position is not barred from taking advantage of scale economies by constructing, for example, a large and efficient factory. These benefits are a consequence of size and not an exercise of power over the market. 12 Nevertheless, many anticompetitive actions are possible or effective only if taken by a firm that dominates its smaller rivals. See Telex Corp. v. International Business Machines Corp., 510 F.2d 894, 925-26 (10th Cir.), Cert. dismissed, 423 U.S. 802, 96 S.Ct. 8, 46 L.Ed.2d 244 (1975). A classic illustration is an insistence that those who wish to secure a firm's services cease dealing with its competitors. See, e. g., Lorain Journal Co., supra. Such conduct is illegal when taken by a monopolist because it tends to destroy competition, although in the hands of a smaller market participant it might be considered harmless, or even honestly industrial. Alcoa, supra, 148 F.2d at 431. 43 In sum, although the principles announced by the § 2 cases often appear to conflict, this much is clear. The mere possession of monopoly power does not Ipso facto condemn a market participant. But, to avoid the proscriptions of § 2, the firm must refrain at all times from conduct directed at smothering competition. This doctrine has two branches. Unlawfully acquired power remains anathema even when kept dormant. And it is no less true that a firm with a legitimately achieved monopoly may not wield the resulting power to tighten its hold on the market. 44