Antitrust Law Daily Wrap Up, ANTITRUST NEWS: AAI asks Eleventh Circuit to uphold FTC decision in exclusive dealing case, (Sep 10, 2014)

By Linda O’Brien, J.D., LL.M.

The American Antitrust Institute (AAI) has filed an amicus brief with the U.S. Court of Appeals in Atlanta in support of the FTC determination that monopolist McWane Inc. used exclusive dealing to restrict market entry and maintain its monopoly power (McWane, Inc. v. FTC, Case No. 14-11363).

In February 2014, the FTC affirmed the finding of an administrative law judge that McWane had used exclusive dealing with distributors to illegally maintain its monopoly in the domestic ductile iron pipe fittings market. In a petition for review filed in the Eleventh Circuit, seeking to overturn the Commission’s decision, McWane argued that the Commission could not establish harm to competition because (1) it relied on harm to McWane’s only competitor and (2) that competitor was less efficient than McWane.

The AAI urged the Eleventh Circuit to reject McWane’s reasoning, which would seriously undermine the goals of U.S. competition policy if the rule of reason was distorted by new burdens and restrictions that would further empower monopolists. The AAI brief argues that McWane, as well as dissenting Commissioner Wright and a group of their supporting academic amici, have proposed legal and economic standards that would deal a serious blow to competition and consumer welfare in both the short and long term. Although McWane asserted that harm to competition and harm to competitors are mutually exclusive, the antitrust laws do not hesitate to protect competitors as a means of protecting consumer welfare, the AAI noted.

The AAI brief challenged the assertion that the FTC failed to prove illegal monopoly maintenance. The Commission found that McWane’s exclusive dealing had blocked rivals from reaching customers through the most efficient channels of distribution. Although McWane’s exclusionary conduct did not foreclose rivals entirely, modern economic learning and decisions like United States v. Microsoft and United States v. Dentsply recognize that monopoly power can still be unlawfully preserved under such circumstances. When it is, competition is harmed, even if the excluded rival is a less efficient competitor. The FTC also properly credited evidence on price effects, market structure, exclusionary intent, and the lack of efficiencies from McWane’s exclusive dealing.

To protect all dimensions of competition, the antitrust laws prohibit all unreasonable exclusionary conduct. McWane’s contention that only competition from “equally efficient competitors” is worthy of protection disregards a rule of reason balancing. Even less efficient competitors can stimulate price competition in a monopolistic market and eventually grow and become an important source of innovation and other non-price competition, the AAI brief concluded.

The American Antitrust Institute is a nonprofit education, research, and advocacy organization based in Washington, D.C. Its mission is to increase the role of competition, assure that competition works in the interests of consumers, and challenge abuses of concentrated economic power in the U.S. and world economy. Founded in 1998, the Institute’s contributors include foundations, law firms, corporations, associations, individuals, and public entities.

News: Antitrust