What Companies Dont Know Can Hurt Them: Monopolization Offenses
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Section 2 of the Sherman Act
In contrast to Section 1 of the Sherman Act, which applies only to concerted action, Section 2 reaches the unilateral activity of companies. The statute provides: "Every person who shall monopolize, or attempt to monopolize, or conspire or combine with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony . . . ."2 Indeed, the primary Section 2 offensesmonopolization and attempted monopolizationapply to unilateral activity and can arise in a variety of different contexts in virtually any industry.
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General Contours of Section 2 Claims
Monopolization requires that a company possesses "monopoly power" and acquires, enhances or maintains that power through exclusionary conduct. As defined by the U.S. Supreme Court, monopoly power constitutes "the power to control prices or exclude competition" and must be analyzed within a relevant market.3 The relevant market is comprised of both product and geographic components. A practical way of thinking about the relevant market is by asking: For each product or service that I sell, with whom do I compete (actually and potentially) and where do I compete?
Monopoly power can be proven through direct or circumstantial evidence. Because direct evidence that a company controls prices or excludes competitors rarely exists, the typical case involves circumstantial evidencefor example, an analysis of whether a defendant has a significant share of the relevant market coupled with barriers to entry. Courts differ on the market share required for monopoly power but, as a general rule, a market share of 70% or greater will create a prima facie showing.4 In contrast, courts generally say that a market share below 50% is insufficient to have monopoly power, although there are rare exceptions.5 Entry barriers, which include factors in a particular market such as high capital costs, limited access to inputs or transportation, required regulatory approvals, or patents, affect the analysis as well. When entry barriers to a market are significant, courts are more likely to find monopoly power because there are fewer opportunities for new competitors to act as a check on a monopolist's ability to raise prices.
Monopoly power alone is not enough. To run afoul of Section 2 also requires exclusionary conduct or "the willful acquisition or maintenance of [monopoly] power as distinguished from growth or development as a consequence of a superior product, business acumen, or historical accident."6 Whether business conduct is exclusionary or actually procompetitive is hotly debated; in fact, "it is sometimes difficult to distinguish robust competition from conduct with
long-run anticompetitive effects."7 As discussed below, the context in which the business conduct occurs must be carefully examined to assess whether it is exclusionary.
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Attempted Monopolization
Section 2 not only prohibits monopolization, but attempts to monopolize as well. That is, a company's exclusionary marketing program or pricing program may still violate the federal antitrust laws even if it does not succeed in attaining monopoly power. Government enforcement agencies sometimes use this provision to pursue unsuccessful attempts to engage in anticompetitive activity that cannot be prosecuted as a conspiracy under Section 1.8
To prove an attempt to monopolize, a defendant must have (1) engaged in exclusionary conduct, (2) with a specific intent to monopolize, while (3) there was a dangerous probability of achieving monopoly power in a relevant market.9 While monopolization and attempted monopolization both require exclusionary conduct, the other two elements distinguish a claim for attempted monopoly. First, an attempt claim requires the specific intent to build a monopoly, not just the general intent to do the allegedly exclusionary act.10 While a mere desire to increase market share or win customers from a competitor does not satisfy this standard, practically speaking, courts may imply the requisite specific intent through a company's exclusionary conduct. Second, because an attempted monopoly claim does not require that a company possess monopoly poweronly a...
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