On May 11, U.S. Assistant Attorney General for Antitrust Christine Varney announced that the Department of Justice Antitrust Division had retracted its September 2008 report regarding Section 2 of the Sherman Act (the Section 2 Report). Section 2 deals with conduct by dominant firms and prohibits them from monopolizing or attempting to monopolize markets in which they do business. Section 2 covers activities such as predatory pricing, refusals to deal, bundled pricing and other conduct that may exclude competitors from the market.
Ms. Varney’s announcement signals a fundamental change in the Justice Department’s approach to monopolization issues. Under the Bush administration, the Justice Department released the Section 2 Report in an attempt to clarify antitrust law applicable to single-firm conduct. The Report, however, triggered widespread criticism from those who argued that the Bush administration’s policies were far too lenient on firms with substantial market power and effectively gave such firms a “free pass” in exercising monopoly power. The reaction to the Section 2 Report was so intense that three of the four Commissioners on the Federal Trade Commission took the extraordinary step of publicly refusing to endorse or adopt it.
The Bush administration had not filed a single case against a dominant firm for violating Section 2 of the Sherman Act. Assistant Attorney General Varney’s speech signals a clean break with that policy. In her remarks, Ms. Varney said, “Withdrawing the [Section 2] report is a shift in philosophy and the clearest way to let everyone know that the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers.” Ms. Varney also emphasized that the Justice Department planned to align itself with the European Union’s stricter enforcement policies concerning single-firm conduct. This new enforcement policy will almost certainly result in increased government investigation of firms with large market shares and will likely lead to a resumption of Section 2 litigation by the Justice Department. For clients with large market shares, or for smaller firms that must live with dominant rivals, this is a significant development.