Innovative Breakthrough or Monopoly Bullying?: Determining Antitrust Liability of Dominant Firms in Exclusionary Product Redesign Cases
Volume 84, No. 4, Summer 2012
By Nicholas S. Smith

United States antitrust law defines two broad classes of conduct as being anticompetitive: collusion and exclusion. Collusion covers cooperation among firms for the purpose of distorting markets to their benefit, whereas exclusion refers to steps taken by a firm to create or maintain a monopoly to harm competitors and force them from the market. Although collusion raises many interesting issues of its own, this Comment focuses entirely on exclusion, and specifically on dominant firms that redesign existing products for the sole purpose of inflicting anticompetitive, exclusionary harm on existing and potential competitors.

Many commentators consider single firm conduct to be the most complicated category of antitrust enforcement. What makes the area of exclusion particularly complicated is the fact that in most cases the conduct in question results in simultaneous economic benefits and exclusionary harms. One of the generally accepted goals of antitrust law is to encourage competition; the problem, however, is that successful competitive efforts and successful exclusionary efforts look the same when implemented and have the same results: the dominant firm expands its market share by reducing or eliminating the market share of competitors. The challenge is to develop a general rule capable of distinguishing between exclusionary conduct, which reduces overall welfare, and competitive conduct, which enhances it. The circuits are split on how to best resolve this challenge; therefore, the goal of this Comment is to determine a test that can be used by courts to distinguish between legitimate competition on the merits and exclusionary product redesign. In addition to functionality, this Comment seeks to provide a test that will also enhance efficiency, foster competition, and incentivize innovation—with the ultimate goal of devising a test that will promote fair results and continuous economic growth.

This Comment first contends that economic growth, and not economic efficiency or consumer welfare, should be the ultimate goal of antitrust. This Comment further contends that reservations regarding the use of intent evidence in monopolization analyses are overstated, and the use of such evidence should be permitted when it is helpful and reliable. Finally, this Comment argues that the test implemented by the D.C. Circuit in United States v. Microsoft, Corp. is the test that all courts should apply going forward. Part II.A provides general background on United States antitrust enforcement including a brief summary of the Sherman Act and a discussion on the development of antitrust law since its enactment. Part II.B describes four different schools of antitrust thought including the Chicago and Post-Chicago Schools, theories based on economic growth and consumer protection, and also discusses theories on the proper role of intent evidence. Part II.C provides an analysis of the three most recent circuit court cases to address the issue of exclusionary product redesign: C.R. Bard, Inc., v. M3 Systems, Inc., United States v. Microsoft Corp., and Allied Orthopedic Appliances v. Tyco Health Care Group LP. Part III.A examines the various proposals concerning the ultimate goal of antitrust. Part III.B provides an answer regarding the proper role for intent evidence. Finally, Part III.C evaluates the three circuit court cases to determine which test courts should use going forward, given the answers provided by Part III.A and Part III.B.

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