Abuse of dominance in USA

Abuse of dominance

How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?

Simply possessing or exercising monopoly power is not illegal under US law.

Instead, US law prohibits only anticompetitive conduct that helps to obtain or maintain a monopoly. US law often refers to this type of conduct as ‘predatory’ or ‘exclusionary’. US law considers both the potential anticompetitive and pro-competitive effects of the conduct. Monopolisation is not subject to per se rules.

The central challenge in monopolisation doctrine is differentiating between conduct that helps to obtain or maintain a monopoly through anticompetitive means (such as exclusive contracts that substantially foreclose competitors from the market without an offsetting pro-competitive justification) as opposed to conduct that helps to obtain or maintain a monopoly through pro-competitive means (such as introduction of a superior or lower cost product). In general, conduct that helps a firm gain or maintain a monopoly only because it makes the firm more efficient is generally viewed as pro-competitive, while conduct that otherwise impairs the efficiency of rivals could be anticompetitive. To establish illegal monopolisation, it is not enough to show that a particular competitor has been harmed; indeed, pro-competitive conduct, like offering a better product or lower prices, will naturally harm competitors. Instead, conduct must harm competition as a whole.

There is no definitive list of what conduct can constitute monopolisation, but the main categories that US law has recognised include predatory pricing, exclusive dealing, loyalty discounts, tying or bundling, refusals to deal and abuses of governmental process.

Does the concept of abuse cover both exploitative and exclusionary practices?

US law does not prohibit the exploitation of monopoly power. Instead, it prohibits only conduct that anticompetitively helps obtain or maintain monopoly power.

What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?

Monopolisation requires proof of a causal connection between the anticompetitive conduct and the obtaining or maintenance of monopoly power. Provided that the anticompetitive conduct and the existence of monopoly power are rigorously proven, US law generally permits a looser standard of proof of the causal connection between the two. For example, in United States v Microsoft, 253 F.3d 34 (2001), the DC Circuit held that the causal connection can be established if the conduct ‘reasonably appear[s] capable of making a significant contribution to . . . maintaining monopoly power’.

Provided that the elements of monopoly power and anticompetitive conduct, as well as the causal connection between them, are established, the anticompetitive conduct can take place in an adjacent market to the market being monopolised. For example, in Microsoft the court found that Microsoft illegally maintained its monopoly in the operating system market by excluding competing internet browsers. However, if monopoly power in one market is used to obtain a non-monopoly advantage in another market, that is insufficient to state a monopolisation claim - the anticompetitive conduct must help obtain or maintain a monopoly in some market.

What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?

Beyond arguing that there is no monopoly power and no anti­competitive effect, a defendant can argue that the conduct has pro-competitive effects. Pro-competitive effects include reducing costs, providing higher-quality products, stimulating investment and preventing free-riding. Often, a burden-shifting analysis is applied in monopolisation cases, where the plaintiff must first establish anticompetitive effects, then the defendant must provide a pro-competitive justification, and then ultimately the burden is on the plaintiff to prove that the anticompetitive effects outweigh the pro-competitive benefits.