2. The Superior Stability of Parallel Exclusion
To this point, we have identified a similar tendency toward
defection in parallel pricing and parallel exclusion. We now suggest
reasons that exclusion schemes may be less likely to collapse.
Two important challenges for achieving coordination are identifying
the coordination point and observing compliance. (174) Both are easier
for parallel exclusion than for parallel pricing.
Identifying the coordination point in oligopolistic price elevation
is complex. At its simplest, there is a continuum of prices that could
be chosen, and the parties have to find some way, often through
communication, to choose one of them. Moreover, that optimal price will
change as supply or demand conditions change, requiring the parties, who
may vary in their perceptions of what if anything has changed, to select
a new elevated price. If the product is differentiated, there may be
many different prices that must be coordinated. Figuring out how to
allocate the gains from price elevation makes the problem even more
complex, (175) because direct payments between the firms are obviously
disfavored, and alternative mechanisms-taking turns in supplying a
customer, or agreeing on the quantity to be sold by each producer-are
likely to require forbidden communication. These allocations will also
require rebalancing if supply or demand conditions change, or if the
parties miscalculate. The need to rebalance increases the fragility of
By contrast, the implementation of parallel exclusion is often
simpler. (176) In theory, the action is often binary: each firm either
deals or refuses to deal with a new entrant; or either engages or does
not engage in tying or exclusive dealing. For example, in Allied Tube,
whether a steel manufacturer had voted to exclude plastic pipes from the
Code was clear, as the vote was conducted by open ballot. Without a
continuum, there is little need for delicate calibration. Moreover,
changes in economic conditions are less likely to change the optimal
selection. Gains are difficult to reallocate with such a blunt
instrument, providing an incentive to stick with the initial allocation.
As a result, readjustments in the sharing rule are also unnecessary.
Here, the comparison to predatory pricing conducted by oligopolists
is instructive. In Brooke Group, a major predatory pricing case, the
Court discussed the significant barriers to successful coordination. The
“anticompetitive minuet” that the Court thought was so
“difficult to compose and to perform” in the context of
oligopolistic predatory pricing (177) is much simpler in the realm of
With price-fixing, observing compliance with the elevated price
level is difficult. Rivals may secretly extend price cuts to particular
customers. This is particularly true for differentiated products, for
which comparisons are more difficult. It is also true when demand or
supply conditions are uncertain, in which case it is unclear whether an
unexpected drop in profits is attributable to a rival’s secret
price cut or instead to a change in conditions. With parallel exclusion,
observing compliance is much easier. It is hard to secretly cut a deal
with an innovative entrant or drop out of an industry-wide exclusive
dealing arrangement unnoticed.
Beyond these two advantages, there is a third factor, which is that
the permanence of the change resulting from accommodation makes parallel
exclusion easier to sustain as compared to parallel pricing. Price cuts
are reversible. Firms engage in price wars and then stop, raising their
price to the old levels. Where the consequences of defection are
temporary, firms are tempted to defect. (178) For parallel exclusion,
permitting entry is comparatively permanent and thus severe. Once a firm
allows an innovative new entrant, the market structure changes
permanently. Consumers become used to and come to rely on the new
arrangement. Aside from consumer expectations, U.S. antitrust policy
makes it harder for an incumbent to reverse course, because cessation of
a course of dealing with a rival is a possible basis for liability.
The exclusionary rules imposed by Visa and MasterCard illustrate
the stability of parallel exclusion. The rules were not set at the same
time. Visa set its rule first, in 1991, while MasterCard lagged by
several years. Once Visa had set its rule, MasterCard had a golden
opportunity. It could gain at Visa’s expense by declining to
exclude banks that adopted other cards, and thereby convince banks to
leave Visa, in favor of issuing MasterCard and (thanks to
MasterCard’s openness) Amex. In fact, evidence produced during
litigation revealed an extensive internal debate about the merits of an
exclusionary rule, in which MasterCard managers argued that openness
would help it gain market share at Visa’s expense by inducing banks
that wanted to issue Amex to abandon Visa. (180)
Ultimately, MasterCard adopted the exclusionary rule-following the
counsel of its future CEO-that MasterCard should “make it as hard
as possible to have Amex do anything anywhere in the world.” (181)
Based on the foregoing analysis, it is not hard to see why. The relevant
rule was simple and well defined. Compliance was visible and easy to
confirm. Unlike a secret price cut, accommodation here would have meant
the end of exclusion. Once MasterCard opened the door to Amex, there
would have been no going back.
While we expect parallel exclusion to be more durable than parallel
pricing, there can be exceptions to this rule. For one thing, we have
focused on the simple, canonical example of oligopolistic price
elevation, in which firms each select a price in reliance on the optimal
price chosen by rivals. As Jonathan Baker has noted, other forms of
price elevation may be simpler to establish and sustain, such as the use
of focal rules (e.g., raise price by five percent every twelve months).
(182) Or, to take another example, firms engaged in geographical market
division could each refrain from entering each other’s territory.
Avoiding certain forms of nonprice competition-a mutual decision not to
innovate, for example- may be simpler than setting an elevated price.
There are additional factors that can lead to the failure of
parallel exclusion, even where exclusion might be in the collective
interest of the excluders. A powerful entrant can undermine its
stability, in much the same way that a large enough buyer can disrupt a
cartel of sellers. If the outsider seeking interconnection or
cooperation owns a must-have application or device, it may be able to
dictate terms that disrupt the existing parallel practice. So, while for
years, carriers had resisted and blocked various smartphone features
like WiFi and Bluetooth, which are valuable to consumers but threatening
to carrier revenues, (183) Apple and Google were strong enough to induce
the carriers to allow these technologies to operate on the
carriers’ networks. (184)
Moreover, the powerful outsider can play one oligopolist against
another in achieving attractive terms. If AT&T cannot provide what
Apple wants, perhaps Verizon Wireless can. There is a possibility of
coordination failure among the oligopolists. The failure can be made
more likely if the entrant commits to offering a differential benefit to
the first defecting incumbent, for example, through exclusivity for a
period. (185) This effect grows large as the number of oligopolists
increases. In this respect, we see the relative weakness of oligopoly,
compared to monopoly, in accomplishing exclusion. (186)
The stability of parallel exclusion has a further important
Interdependent excluders will often not need any agreement-or, more
specifically, will not need the communications that are emphasized in
some accounts to provide a basis for finding agreement under section 1.
(187) The characteristics of parallel exclusionary conduct-simplicity,
transparency, and permanence-make it less necessary for communications
that define, report, and respond to each firm’s actions. (188)
This fact makes “agreement” a particularly poor proxy for
determining when interdependent parallel exclusion will be
harmful-setting up a paradox of proof of the kind introduced in Part I.
Those exclusion schemes that are likely to last the longest and (all
else equal) therefore to do the most harm can persist without
communication. The easier and more effective parallel exclusion is, the
less likely it is to be addressed under antitrust doctrine that focuses
on horizontal agreement among the excluders. After all, if parallel
exclusion is already easy, and (whatever gives rise to an inference of)
agreement merely makes it a little easier, but much rislder legally,
then the excluders will simply avoid that particular means of
maintaining the oligopoly.
In fact, the paradox may be significantly more severe for parallel
exclusion, compared to oligopolistic price elevation. It may be
difficult in practice to accomplish price elevation without relying on
the forbidden activities, such as communication, that support a finding
of agreement. (189) By contrast, parallel exclusion may be relatively
easy to accomplish without such activities, and if so, the paradox is
more likely to arise in the context of parallel exclusion. Despite this,
under current law, the existence of horizontal agreement is sometimes
treated as a necessary condition for liability. This problem is taken up
in Part IV.
3. Recidivist Exclusion
As argued above, exclusionary schemes may be less prone to collapse
than pricing schemes. But the cooperative outcome is just one of many
possible equilibria. (190) Why is that particular equilibrium chosen?
Our case studies suggest that the particular history and developed
customs of the industry, and especially prior episodes of explicit or
monopolistic exclusion, may serve to identify a common coordination
point and make detecting and punishing deviation easier.
Exclusionary schemes often result not from a careful calculation by
an oligopoly’s leaders, but rather arise when firms simply follow
customary practices. An exclusionary scheme can result from merely
copying the conduct of the industry leader, by continuing to do whatever
the monopolist did prior to divestiture, or identifying some group as
“outsiders” and keeping them out. It may also result from an
earlier agreement among firms, such as a formal boycott of a rival, to
which firms adhere even after the formal boycott is shut down. Firms may
persist informally with the old practices when a focal point is created
in the earlier period.
Numerous examples illustrate such “recidivist exclusion*”
Consider, for example, the Tobacco Trust* In this pattern, a one-time
exclusionary monopoly is broken up by legal decree. In the decades that
follow, however, the parts, after breakup, are able to cooperate to
collectively exclude market entrants from their industry.
The tobacco oligopoly’s continued use of the old Trust’s
exclusionary practices led to threats by the Department of Justice in
1914, (191) FTC action in the 1920s, (192) and finally a Department of
Justice lawsuit, pursued in the 1940s, that resulted in the American
Tobacco decision. (193) In its decision, the Supreme Court emphasized
the recidivism problem. It was easier for the former parts of the Trust
to exclude new competitors. The fact that “the sales of so many
products of the tobacco industry have remained largely within the same
general group of business organizations for over a generation,”
said the Court, “inevitably has contributed to the ease with which
control over competition within the industry and the mobilization of
power to resist new competition can be exercised.” (194) The Court
suggested that “[s]uch a community of interest … provides a
natural foundation for worldng policies and understandings favorable to
the insiders and unfavorable to outsiders.” (195)
This pattern of recidivist exclusion repeats itself in wireline
telecommunications. The AT&T monopoly, over its many decades as a
federally regulated monopoly, practiced various strategies that kept out
any would-be competitors, often relying on the aid and consent of the
government. Perhaps the most important of these strategies was a federal
law that prohibited or strongly conditioned entry into markets
controlled by AT&T. (196) By the 1920s, the exclusion of non-Bell
firms from the telephone industry was an established practice.
Over time, AT&T added other techniques to keep outsiders out of
markets such as long-distance carriage or home equipment. For example,
Bell published and occasionally enforced tariffs threatening to
disconnect the telephone service of any subscriber who attached non-Bell
equipment, such as answering machines or speakerphones, to their
telephone or telephone line. (197) The most famous example of this was
Bell’s exclusion of the Hush-A-Phone, a phone “silencer,”
whose exclusion was litigated before the FCC and the D.C. Circuit. (198)
While AT&T ultimately lost the Hush-A-Phone case, it was decades
before residential consumers were permitted, for example, to freely
attach a foreign telephone or answering machine to a Bell telephone
line. Similarly, at the other end of the local line, for decades Bell
and the FCC refused to permit any competing long-distance firm to do
business. (199) Consequently, until the mid-1960s, Bell’s exclusion
of competitors was more or less complete.
During the late 1960s and 1970s, the FCC changed its policies and
began to allow entry into various telephone markets. (200) AT&T,
however, continued its exclusionary strategies in defiance of the law,
making life difficult for the sellers of handsets and long-distance
carriers who wanted to attach to its system. (201) That pattern of
exclusion was the impetus for the antitrust lawsuit that eventually
broke up the firm. (202) The breakup of AT&T in 2984 left behind
AT&T as a separate company and seven regional monopolies, the Baby
Bells. Of the original eight, three firms remain: Verizon, Qwest, and
The long-standing practice of excluding non-Bell firms from the
telephone industry was maintained, in different forms, by the various
regional monopolies created by the 1984 AT&T breakup. Since the
breakup, the former Bell companies have repeatedly been accused of
parallel exclusionary practices similar to those practiced by the united
AT&T in the 1970s (and for that matter, in the 1910s). The
post-break-up promise of high margins in the telephone business
attracted a rash of new entrants into local telephony, and later into
Internet services, particularly after the 1996 Telecommunications Act,
which was written to introduce competition in local telephone services.
(204) Some of the entrants were new; others were long distance carriers
seeking to offer local service, like MCI. However, regardless of which
Bell the entrants faced, the firms encountered similar exclusionary
practices that are widely understood by industry observers as
contributing to the failure of competitive entry by the early 2000s.
A history of explicit governmental protection from competition can
also lay the foundation for later exclusionary practices. In the case of
AT&T, the firm was statutorily protected from competition for many
years, creating a focal point for later, private measures, discussed
below. Similarly, the eight European shipping lines doing business in
Africa in the CEWAL case had a long history of protection from
competition dating back to colonial times. (206)
A history of monopoly exclusion is not the only kind of relevant
history. Consider the American film industry, which, while never a
monopoly, has a long history of repeated exclusionary practices. In
1908, the industry took on the form of an explicit exclusionary trust,
which was broken up by federal decree in the 1910S. (207) By the 1930s,
the industry had reassumed the form of an oligopoly of vertically
integrated firms known as the “studio system”; these firms
were found liable for various exclusionary practices and subjected to
divestiture. (208) In later cases, industry players were once again
found liable for the same practices they had engaged in predivestiture.
As these examples indicate, anticompetitive parallel exclusion
schemes need not arise as the product of a calculation or backroom deal.
Rather, having successfully excluded entrants before seems to increase
the ease of doing so again by simply following tradition and custom in
the industry. These examples also suggest one potential limit on the
effectiveness of divestiture as an antitrust remedy. The resulting firms
have a significant capacity for exclusion even after divestiture, and
their previous history of cooperation makes it more likely that they
will continue to exclude.
4. Oligopoly Size
A second feature of industry structure-the size of the oligopoly-is
also important in determining the stability of parallel exclusion, just
as it plays a role in parallel pricing. This follows for several
reasons. An exclusion scheme is usually a collective good, because it
provides a benefit for each member of the group from which other members
cannot be excluded. For example, if, by blocking entrants, an oligopoly
maintains a higher price, each member benefits from that higher price
and none can be excluded from it. As Olson’s group theory suggests,
the size of the group has an important and often decisive effect on the
group’s ability to produce such a collective good. (210) The
smaller the group, the greater the chance that it will be worth it for a
single member to invest to produce the good, even if the rest of the
group is expected to free-ride on that effort. Compare an industry
divided into three equal shares with one divided into fifty. In the
former example, a unilateral investor in the exclusionary scheme still
gets one-third of the benefits, even if the other two members of the
group can be expected to shirk. (211)
In addition, the transaction costs of cooperation increase with
group size. The costs of communicating, detecting, and punishing
deviation increase as an oligopoly gets larger. That does not mean that
large groups, comprising hundreds of members, cannot cooperate; it means
that they will usually require some elaborate apparatus to ensure such
cooperation. (212) Hence, all else being equal, a more concentrated
industry will have an easier time finding a mutually beneficial
cooperative outcome, even without explicit agreement.
And when we look at the main historical exemplars of parallel
exclusion, small, tight oligopolies predominate. The fact that there
were just two open credit card networks in the 1990s, Visa and
MasterCard, likely made joint exclusion easier. The tobacco oligopoly
was aided by its small size, just three major firms. The film industry
convicted of jointly excluding theaters in the 1940s comprised five
All this does not mean it is impossible for a larger oligopoly to
exclude entrants. As the Allied Steel case makes clear, exclusion can be
accomplished by a large group, but a more sophisticated infrastructure
of some kind will usually become necessary. That point, and the general
disadvantages faced by larger groups, are well illustrated by the story
of the Fashion Originators’ Guild in the 1930s. (213)
At the time, just as American fashion was becoming an important
cultural force, U.S. designers were afflicted by “style
pirates,” who copied and sold versions of their designs at a much
lower price. Starting in 1932, under the leadership of Maurice Rentner,
the self-styled “King of Fashion,” a group of twelve
dressmakers joined forces to do something about it. Members registered
their designs with the Guild. The Guild employed enforcement agents who
found and reported retailers who sold knock-offs. Every month, the Guild
published a list of offenders, known as “red-carded”
retailers, and Guild members were instructed not to show, ship, or sell
their merchandise to any retailer appearing on the red-card list.
Retailers therefore faced a choice: defy the Guild and face a group
boycott by the most significant manufacturers, or comply by excluding
the manufacturers of knock-offs.
The Guild’s detection and enforcement infrastructure gives a
good sense of what can be necessary to maintain an exclusionary scheme
in an unconcentrated industry. The Guild was a success as a formal
arrangement: one entity (the Guild) acted as an agent for all the firms
in punishing retailers that did business with copyists. This
arrangement, however, made it a target for antitrust enforcement. After
private complaints, the FTC brought suit, and the Supreme Court
eventually condemned the arrangement as a violation of the FTC Act.
As the Guild dissolved, it exhorted individual firms to continue
the practice on an individual basis. (215) The higher-priced fashion
designers did indeed have a collective interest in pressuring retailers
and boycotting those that sold knock-offs. But each designer also had
powerful incentives to shirk those responsibilities and let others do
the work, or to give up entirely on the assumption that many others
would do so as well. Predictably, the Guild’s efforts collapsed.
The Guild’s failure, in contrast with the success of similar
efforts in other industries, may have just been a matter of numbers.
This was no tight oligopoly, but a collection of 176 manufacturers.
(216) Its exclusionary strategy was also extremely elaborate. The Guild
monitored some 12,000 cooperating retailers, and had a sophisticated
process for monitoring violations of the exclusion regime, which
otherwise were difficult to detect. (217) Extensive communication-a
complex machinery for detecting and punishing retailers-was absolutely
necessary. Without that machinery, the problems of defection and
shirking became pervasive.
B. Exclusion as a Dominant Strategy
Parallel exclusion does not always require interdependence. In
important cases, it can be achieved through the independently
incentivized action of each firm. The essential dynamic is no longer a
prisoner’s dilemma, because exclusion is a dominant strategy for
For example, exclusion may be a dominant strategy in an oligopoly,
when it becomes cheap enough for a single member of the oligopoly to
pursue exclusion, even if the other members were to free-ride. For
example, the manipulation of standard setting in Allied Tube did not
require the payment of any agents. Though it was not costless to stack
the meeting, the costs were low. Even where agents must be paid to go
along, the agents often are unable to coordinate their response, so the
payment is minimal.
Parallel exclusion may also be implemented in dominant strategies
when the excluders are not competing oligopolists, but monopolists. Let
us return to the example of wireline telecommunications. When AT&T
was broken up into regional Bells, the result was multiple firms in
place of a previous nationwide monopoly. But this did not create an
oligopoly of competing providers, as it did in the tobacco industry.
Rather, it created a set of local monopolies.
Compared to a member of an oligopoly considering defection from an
exclusionary scheme, a local monopoly has much less to gain from
accommodating entry. There is no profitable accommodation by the firm,
where the result would be lower profits (due to competition) in the
region where the incumbent has market power. The outcome is predictable:
each incumbent will fiercely resist entry, whatever the others do. But
there is an additional effect. Successful resistance by each incumbent
can be synergistic. It contributes to the overall difficulty that the
new entrant faces in achieving minimum scale.
We can see this dynamic play out in wireline telecommunications. An
industry-specific statute, the 1996 Telecommunications Act, was designed
to facilitate the market entry of competitive carriers into the local
territories of the Bell companies. (218) It provided a legal pathway
whereby these entrants could reach consumers by leasing parts of the
incumbent’s infrastructure, including, most importantly, the copper
wire that enters a subscriber’s home. That pathway provided a
mandated basis for competition.
Nevertheless, the incumbents each fought fiercely to limit entry.
Various lawsuits document a remarkably similar range of efforts, from
delays and misfeasance to sabotage, to exploit competing carriers’
dependence on the underlying physical infrastructure. (219) These
efforts apparently made it difficult or impossible to offer service of
comparable quality and reliability.
The conduct, much of which violated the 1996 Act if it took place
as alleged, was matched by some regulatory responses. Between 1996 and
2002, regulators imposed on the Bells an estimated $1.8 billion in
fines. (220) However, the effect of these measures on Bell behavior was
unclear, and entrants and some commentators remained dissatisfied with
the regulatory response. (221) Some entrants and customers filed
antitrust suits against individual Bells under section 2, and others
filed the Twombly case, alleging that the Bells had engaged in a
conspiracy to exclude would-be entrants.
Our interest here is not in the merits of the allegations or in the
interaction between antitrust and telecommunications law, but rather the
game-theoretic interaction of the Bells and their ability to sustain an
exclusion regime. The first element worth noting is that each Bell had a
clear, straightforward incentive to exclude new entrants in its region,
as successful entry would reduce the profits of the Bell. (222) In
addition, this direct exclusion had a second effect: it made it more
difficult for a would-be entrant to gain sufficient scale to assist it
in entering other regional markets.
This additional benefit conferred on other Bells was unlikely to
cause any Bell to cut back on its exclusionary efforts. Each Bell had a
powerful unilateral incentive to exclude, and could do so at low cost.
Thus the temptation to shirk was low. Moreover, the size of the
externality was small in practice. From the standpoint of each Bell,
successful exclusion in other regional markets was valuable, because it
reduced the entrant’s opportunity to pose a competitive challenge
to the Bell in the future. So part of the external benefit is
internalized after all. To this extent, the Bells had a unified,
collective interest, in addition to their individual interests.
These dynamics received some attention in the Twombly decision. The
Court pointed out that for each Bell, there was no benefit to
accommodation. Agreeing to let a competitor in was of no clear advantage
to one Bell against the others. (223) To the contrary, the Court
recognized, any individual Bell had a very strong incentive to prevent
the entry of its competitor, because it simply took revenue away from
the Bell. (224) This was true regardless of what the other Bells decided
The Court also recognized the potential synergy among the
Bells’ exclusion decisions. It acknowledged the possibility that
“success by even one … [entrant] in an … [incumbent’s]
territory would have revealed the degree to which competitive entry …
would have been successful in the other territories.” (225) This is
a distinct (and, in our view less plausible) effect than the one we
suggested above. But it has the same implication, that the decisions are
mutually reinforcing without any suggestion that the dominant strategy
has been undercut.
This analysis suggests that a group of noncompeting monopolists,
like the Bells with respect to wireline service, can maintain a stable
parallel exclusion scheme for far longer than a typical, internally
competitive oligopoly. Moreover, they may be able to do so without any
significant interdependence in their decisions to exclude. Where
exclusion is a dominant strategy, hunting for a horizontal agreement is
both fruitless and beside the point.
The analysis so far demonstrates several points. A scheme of
parallel exclusion may be more harmful than one of parallel pricing, yet
easier to maintain. When the decisions of excluders are interdependent,
often no communication among them will be necessary, and when
communication does occur, it will be difficult to detect. Sometimes
exclusion can even be implemented as a dominant strategy without any
These features of parallel exclusion suggest that a doctrinal focus
on horizontal agreement among the excluders is misplaced and
Despite this, lower courts sometimes emphasize or insist upon such
agreement as a prerequisite to liability. (226)
In this Part we offer two doctrinal routes for handling parallel
exclusion claims, without looking to a horizontal agreement among the
excluders as an important feature for establishing liability. Both are
rooted in commentary or case law. They stem from two fundamental
antitrust claims that may be brought against a monopolist: Did the
monopolist improperly maintain its monopoly power and thereby
“monopolize”; and did the monopolist enter into contracts with
other parties that illegally restrain trade? Our approach can be
understood by asking the following hypothetical question: If Microsoft
had been split into two or three firms that undertook the same
exclusionary activity, would we treat them differently and more
leniently? Our fundamental answer is no.
The first proposal, considered in Section W.A, is to recognize a
“shared monopoly” claim of monopolization under section 2 of
the Sherman Act. We propose that such a claim be carefully limited to
those circumstances under which the conduct, if engaged in by a single
firm rather than the multiple excluders, would state a claim under
section 2. Acknowledging some courts’ insistence that a horizontal
agreement among the excluders must be present, we identify several ways
to satisfy that requirement. This Section also suggests a fallback
position for those concerned about an expansion of antitrust liability,
which is for the FTC to bring monopolization claims under section 5 of
the FTC Act, an authority separate from the Sherman Act that is
unenforceable by private plaintiffs.
The second route, discussed in Section IV.B, assigns liability for
parallel exclusion accomplished through vertical agreements, such as
exclusive dealing and tying. This result is already embodied in Supreme
Court precedent, under which the exclusionary effect of multiple
excluders must be added up, or “aggregated,” in order to
properly assess the overall exclusionary effect of the conduct. We
believe this doctrine, though it does not reach all instances of
competitive harm accomplished through parallel exclusion, is valuable in
resolving some important instances.
The remainder of the Part describes two further doctrinal
implications of our analysis. Section IV.C spells out an implication of
parallel exclusion for horizontal merger policy: if a merger improves
the ability of remaining firms to engage in parallel exclusion, this can
be a basis for prohibiting the transaction.
Section IV.D examines one implication of our de-emphasis of
horizontal agreement among excluders–that just as horizontal agreement
is not necessary for antitrust liability, neither is it sufficient.
A. Monopolization by Multiple Firms
1. Shared Monopoly
Section 2 of the Sherman Act, which prohibits
“monopoliz[ing],” (227) is a natural place to look for relief
from anticompetitive exclusion by excluders acting in parallel. Suppose
that the excluders are collectively acting in a way that mimics the
exclusionary behavior of a single firm, and that behavior, if practiced
by a single firm with comparable power to the excluders, would violate
section 2. Then from a functional perspective, the same legal treatment
should apply when multiple firms undertake the behavior. Such a case is
sometimes called a “shared monopoly” violation, (228) though
this is a misnomer because the allegation is monopolization, rather than
mere monopoly. Monopoly as a status offense is not recognized under U.S.
antitrust law; monopolization is.
Section 2 is a suitable home for parallel exclusion cases. One
important benefit is to invite a disciplined inquiry into the economic
consequences of the conduct. These consequences, rather than the fact of
horizontal agreement, are the more appropriate focus of analysis.
Section 2 instead focuses attention on the truly important question:
whether rivals were unjustifiably excluded from the market, with harm to
consumers. To be sure, this is not an easy task, but it is one worth
undertaking, and for the same reasons that we pursue the analogous task
for single-firm conduct to which section 2 applies.
A further benefit of using section 2 is to eliminate the paradox of
proof. As discussed previously, the paradox arises if a decisionmaker,
assessing a market structure highly conducive to exclusion without
provable agreement among the excluders, paradoxically concludes that
this factor counts against liability. (229) By focusing directly on the
economic effects of exclusion, this risk is avoided.
As an initial matter, a parallel exclusion claim under section z
would have to rely on a uniform practice adopted in parallel by the
firms in question, which is itself a highly demanding test. This is an
“exceptionally powerful” filter because it rules out many
situations in which an entrant has an adequate means of purchasing
inputs and reaching consumers. (230)
Under our approach, a plaintiff must then establish the three key
elements of a claim of anticompetitive exclusion, as provided for in
United States v. Grinnell, United States v. Microsoft, and other cases.
(231) First, is there sufficient monopoly power to produce an
anticompetitive effect? Here, the inquiry would typically focus on the
traditional questions of market definition and market share, with the
difference that the court would consider collective market share rather
than the share of a single dominant firm. As with other market power
inquiries, moreover, the status of monopoly power could be inferred from
the effects of the conduct.
Compared to the more familiar monopoly power analysis where there
is a single excluder, here there is an additional factor. We need to
evaluate the internal stability of the excluders, in addition to the
external constraints that temper the exertion of monopoly power. With a
large number of excluders and no means to coordinate their actions,
successful exclusion is unlikely; firms are more likely to defect and
shirk. Thus, we would impose a presumption that monopoly power is
absent, unless there is either a small number of excluding firms or a
horizontal agreement among them that gives rise to a “conspiracy to
monopolize,” an alternative explored in more detail below.
Second, does the conduct in question-whichever of the many
mechanisms of exclusion are used-restrict the prospects of competitors
in a manner that in turn harms competition? As discussed in Part I,
often the answer will be no. (232)
If the answer is yes, we reach a third question: Is the conduct
nevertheless justified on account of the efficiencies it produces? Only
at the end of these three demanding steps would antitrust liability be
We can return to the Visa-MasterCard litigation with which we began
the Article to see our section 2 approach in application. There, the two
major networks adopted parallel rules punishing banks that issued Amex
cards. The case was brought as a section 1 case, but might have been
more suitably litigated as a shared monopoly case.
Visa and MasterCard both adopted functionally the same rule,
satisfying the uniformity requirement. Given a combined market share of
over seventy percent, the two would collectively have a preponderant
share in the “network services” market, the market asserted by
the United States and found by the Second Circuit. The case would then
have turned on whether the exclusionary rule indeed excluded its
competitors, with harm to competition, and what (if any) procompetitive
justifications the defendants might have devised.
This is a preferable approach, first, because it does not turn on
the existence of an agreement, whether between the two payment networks
or between the network and its member banks. This overemphasis on
agreement has been aptly criticized by the payment networks themselves.
(233) Nor does the analysis change if the network is an independent
corporation rather than owned by the banks. Moreover, it remains
unchanged if the rule is implemented through a threat rather than by
formal adoption. These factors are important for section 1 litigation,
but inessential to section 2. Moreover, the section 2 approach has a
second advantage, which is to focus analysis on the cumulative effect of
the conduct, rather than treating the conduct of Visa and MasterCard
each in isolation.
Donald Turner, though remembered today as an opponent of parallel
pricing cases, was a forceful advocate of the shared monopoly approach
to parallel exclusion. He suggested liability under section 2
“[w]here oligopolists sharing monopoly power have engaged in
restrictive conduct lacking any substantial justification.” (234)
Our analysis also leaves us in agreement with other prominent
commentators, including Areeda and Hovenkamp, who have proposed
“congruent treatment” of shared monopoly and single-firm
conduct. (235) A shared monopoly approach is also supported by the
interpretation, expressed in older Supreme Court cases, that section 2
functions to prevent frustration or evasion of section I (here, due to
the lack of a provable horizontal agreement).(236) The shared monopoly
approach also enjoys some support in Europe, where the analogue to
section 2 may be understood to reach parallel exclusion as an abuse of
“collective dominance.” (237)
Lower courts, however, have rejected the shared monopoly approach
to section 2, even while recognizing the unjustified gap that would
thereby be created in antitrust law.(238) These courts tend to insist
that a single firm have (citations omitted)); see also 1 ABA SECTION OF
ANTITRUST LAW, supra note 228, at 328 (“Lower courts consistently
have rejected the shared monopoly theory in the absence of any
allegation of a conspiracy to monopolize, not permitting Section 2 to be
invoked as a tool to monopoly power. The reasons for this are murky, but
might ultimately rely on a highly textual reading of section 2. (239)
2. Conspiracy To Monopolize
Section 2 imposes liability not only for “every person who
shall monopolize,” but also for those who would “combine or
conspire … to monopolize.” A substantial amount of
anticompetitive parallel exclusion can be pursued as a conspiracy to
monopolize. Reliance on this provision would rule out claims premised on
independent exclusion, while claims based on interdependent exclusion
would remain in play. One court, for example, has suggested that
“oligopolistic interdependence” among the excluders would be
enough to satisfy the horizontal agreement requirement?(240) We agree,
and would interpret the horizontal agreement requirement broadly, to
minimize its effect as a formalistic impediment to liability. Our broad
reading has three components:
Interdependence. The most ambitious position is to understand
“agreement” in a way that reaches all interdependent parallel
exclusion. This position might appear to face a significant doctrinal
hurdle. After all, Twombly can be read to reject mere interdependence as
a basis for horizontal agreement.(241) However, properly conceived,
Twombly is a holding about parallel and mutual forbearance from
competition, not parallel exclusion. It is not a holding about what
constitutes agreement for purposes of parallel exclusion.
To see why, recall that Twombly addressed two different allegations
by plaintiffs. (242) One was an allegation of mutual forbearance from
competition, that each regional Bell had decided not to enter other
Bells’ markets, in anticipation of retaliation if it did so. (243)
Here, the Court indicated that mere interdependence is insufficient to
raise an inference of horizontal agreement. (244) The Court also
considered an allegation of parallel exclusion, that each Bell had
denied entry to new rivals. (245) But as discussed in Section III.B, the
allegation of parallel exclusion did not entail interdependence. Each
Bell had an independent incentive to exclude. The Court therefore had no
occasion to decide whether interdependent parallel exclusion raises an
inference of horizontal agreement.
Thus, even if Twombly has closed the door in the context of
parallel pricing and other forms of mutual forbearance from competition,
the door remains open in the distinct context of parallel
exclusion.(246) We therefore disagree with cases that treat Twombly as
controlling the outcome of parallel exclusion,(247) particularly where
interdependent exclusion, rather than independent exclusion, is being
alleged. Moreover, a different rule for parallel exclusion is desirable,
for all the reasons that we have discussed, including the important
harms at stake and the superior stability of exclusion, particularly the
relative ease with which exclusion can be supported without extensive
communication or other infrastructure of agreement.
Price-Fixing as a Shortcut. A second route exploits the connection
between parallel exclusion and parallel pricing. In some instances,
incumbents simultaneously engage in price-fixing and parallel exclusion.
Moreover, the exclusionary conduct may be visible, while the horizontal
agreement as to price remains hidden and difficult to prove. Where
direct evidence of a price-fixing agreement is missing, plaintiffs may
instead present evidence about the defendants’ conduct or market
structure that provides a basis for a fact-finder to infer that a
price-fixing agreement is present. This indirect evidence of a hidden
price-fixing agreement, often referred to as “plus factors,”
can include the observation of parallel exclusionary activity. (248)
From the standpoint of deterring parallel exclusion, this is a
highly indirect approach, as it uses parallel exclusion as a means to
prevent price-fixing cartels, which in turn would limit the prevalence
of parallel exclusion associated with the cartel. It is also limited,
inasmuch as parallel exclusion is not always a means to support and
reinforce interdependent, oligopolistic price elevation. As we have
explained, in some instances the excluders do not actually earn
supracompetitive profits, but merely keep out better competitors.
Indeed, recognizing that fact undermines the inference that parallel
exclusion necessarily implies price elevation. Moreover, even if there
is price elevation, it does not follow that the price elevation should
be actionable simply by virtue of parallel exclusion. An automatic
inference of agreement, if recognized, would open an enormous back door
to liability for price elevation. In our view, parallel exclusion
imposes distinct harms that we might wish to prohibit, even if we
tolerate a certain amount of price elevation.
History. Finally, we would recognize, as one of the
“plus” factors that suffices to create a factual question as
to horizontal agreement among the excluders, the history of the
industry. (249) It is plausible to infer that the Big Three tobacco
companies, postdivestiture oil producers, or major film companies might
have an understanding based upon their previous work together. A history
of previous agreement between the defendants seems particularly valuable
in identifying concerted action.
We do not prefer this approach of treating exclusion as a
conspiracy to monopolize under section 2; it would be better to dispense
with horizontal agreement in a monopolization case. Our suggestions do
not completely remove horizontal agreement among the excluders from the
picture, as a factfinder would still be free to reject the possible
inference of horizontal agreement arising from the plus factor. But this
approach would at least reduce the importance of horizontal agreement.
Our recommended approach is a stopgap measure demanded by some
courts’ unwillingness to consider section 2 liability without such
Moreover, we must stress that the finding of a horizontal agreement
is one step in a longer chain. We do not, therefore, advocate per se
liability for a horizontal agreement to engage in conduct potentially
capable of having an exclusionary effect. As discussed in Section IV.D,
we do not regard horizontal agreement as sufficient. The virtue of a
section 2 approach is that we must still satisfy the usual rigorous
steps of section 2 analysis. A claim would fail if the defendants lacked
sufficient market power. The claim would also fail if the practice in
question had no anticompetitive effect or had a powerful procompetitive
3. FTC Enforcement
The judicial resistance to recognizing shared monopoly as an
antitrust violation, which is generally unexplained in the cases, may
have less to do with theory and more to do with concerns about private
litigation. Even though oligopoly exclusion can have similar economic
effects as monopoly exclusion, courts seem reluctant to open up
opportunities for antitrust attacks against entire industries. As
exclusion may be easy to allege, and expensive to disprove, shared
monopoly complaints might become an attractive area for strike suits.
This reluctance is consistent with a tendency in the courts to identify
areas where conduct may give rise to competitive harm but where the
Sherman Act should, at most, be sparingly applied because of prudential
concerns. This tendency reflects the idea, stated by the Court in recent
years, that the “cost of false positives” sometimes outweighs
the benefits of antitrust intervention and “counsels against an
undue expansion of section 2 liability.” (250)
For those with this concern, we suggest that parallel exclusion is
a suitable subject for FTC enforcement under section 5 of the FTC Act.
(251) Section 5 grants the FTC the authority to challenge “unfair
methods of competition.” The exact scope of the Commission’s
authority remains unclear, but Turner had “little doubt” that
section 5 was available in cases of shared monopoly. (252) It seems to
us that section 5 could be a useful tool for combating forms of parallel
exclusion that clearly violate the policy of the Sherman Act, even if
they may not be reachable under its letter, and even if courts would be
unwilling to create a substantive basis for liability for private
Importantly, when the Commission brings a case based solely on its
unfair-methods authority, it does not create a definitive precedent for
private plaintiffs.(253) As the Supreme Court has repeatedly emphasized,
the FTC Act’s prohibitions are broader than those of the Sherman
This point is important when a Sherman Act-type case could yield
legal standards that might, if available to private plaintiffs, yield
unacceptable levels of litigation, strike suits, or monetary remedies
under the treble damage provisions of the Sherman Act. The statutory and
prudential logic that compels an Article III court to narrow its
enforcement of the Sherman Act does not apply to an independent
commission with limited remedies enforcing a different law. The
enforcement could be accomplished through FTC challenges in individual
cases, or alternatively through rulemaking. (255)
Over its history, the FTC has shown some willingness to challenge
unilateral exclusionary conduct in cases where the conduct is considered
to lack any legitimate basis. Examples include bribery, (256) sham
litigation, (257) fraud on the Patent Office, (258) or manipulation of
the standard-setting process. (259) Some of these cases are against a
single firm and would readily satisfy section 2-for example, when a
fraudulently obtained patent conveys a monopoly over a given market.
There is no bar to bringing a similar action against oligopolists acting
in parallel. The FTC has sometimes challenged each member of an
oligopoly for unilateral exclusionary conduct. For example, in 1978, the
Commission filed separate complaints against three of the major American
airplane manufacturers, alleging exclusionary bribery. (260)
The FTC’s history of shared monopoly cases, however, is also
grounds for caution. In the 1970s, its cases in the oil and breakfast
cereal industries lacked clear theories of anticompetitive conduct or
harm. After years of litigation, the suits were abandoned. Other efforts
in the 1980s by the Commission to challenge joint industry practices
have similarly floundered for want of either a good theory of harm or
evidence of anticompetitive conduct. (261)
However, despite some of the setbacks it has faced, the Commission
should use its section 5 power in a case where it is clearly
effectuating the policy of the Sherman Act, but where the agreement
requirement cannot be satisfied. The clearest case for such a section 5
action is one of independently incentivized but nonetheless harmful
exclusionary tactics, where the methods used lack a plausible or
cognizable efficiency justification. Such a case may fail to satisfy the
letter of the Sherman Act, due to the absence of a monopoly, an
agreement, or evidence from which a tacit agreement can be inferred.
However, as we have suggested, the harm from such practices may be
great, and the scheme may be long lasting. Such cases may not be common,
but as our case studies suggest, they exist.
B. Aggregation of Contracts in Restraint of Trade
A second means of addressing parallel exclusion looks primarily to
section 1, rather than section 2, of the Sherman Act. Parallel contracts
reached by the excluders with other parties satisfy the requirement of
concerted action under section 1.(262) This route has a significant
limitation, in that it requires the use of contracts. It therefore does
not reach simple exclusion schemes that do not rely on agreement. (263)
But a solution that covered parallel exclusion accomplished through
contracts would still be an important step forward.
As an example, consider recent suits alleging exclusion by
producers of innovative surgical instruments. (264) Taking the
allegations as true, two manufacturers, with a collective ninety-five
percent market share, dominated the market for instruments used in
minimally invasive “keyhole” surgery. Each reached agreements
with downstream organizations, so-called “group purchasing
organizations” (GPOs), that negotiate purchases on behalf of
hospitals. Under these agreements, according to plaintiffs, the GPOs
were induced to reject competing instrument makers with superior
technology through various tactics. (265) In evaluating these claims on
a motion to dismiss, courts considered the aggregate foreclosure of the
agreements taken as a whole. (266) If the conduct was not aggregated, a
small firm would not be liable for its part in the conduct, because its
market power or amount of foreclosure was considered too small to
satisfy the standards of exclusive dealing usually applicable to a
single firm. In the extreme case, no firm would be liable.
The basic approach is to determine liability under section 1 by
adding up the effects of an industry-wide contracting practice. (267)
This approach finds support in Supreme Court doctrine. In the Standard
Stations case discussed in Part II, the Court recognized that parallel
exclusion through exclusive dealing is actionable, even without an
agreement among the excluders. (268) The Court emphasized the
industry-wide nature of the practice, which (in the Court’s view)
allowed the incumbents to act “collectively, even though not
collusively,” to prevent new entry. (269) Although the case has
been criticized, the critiques have focused on the absence of
anticompetitive effect on the particular facts at issue, not
aggregation. (270) Later Supreme Court cases have emphasized the use of
aggregation in Standard Stations, (271) and the Court has employed
aggregation in a second case. (272)
Our analysis supports the use of aggregation in exclusive
contracting cases. We would apply the same approach to parallel tying
cases.(273) Such a case would proceed under a rule-of-reason analysis
that considers the collective effect of the tying. (274) This approach
is far from a free pass, because the plaintiffs would be obliged to
demonstrate an anticompetitive effect.
A robust aggregation doctrine makes it unnecessary to inquire into
horizontal agreement in cases that do not require it. For example, in
the debit cards case, an important and (because of settlement)
unresolved doctrinal question was whether the aggregate effect of Visa
and MasterCard’s conduct could be considered, if the court had
concluded that there was no horizontal agreement between the two
networks to tie credit and signature debit cards. (275) Under
aggregation, the answer is clearly yes.
Aggregation also avoids strange and incorrect outcomes premised on
the differential size of parallel excluders, in which a large excluder
attracts antitrust liability but a small firm engaged in the same scheme
does not. For example, in the debit cards case, the district court
concluded as a matter of law that Visa possessed market power, but
denied a similar motion as to MasterCard. (276) This raised the prospect
that liability for the smaller network might depend on the presence or
lack thereof of horizontal agreement, rather than on the economic
effects of the scheme in which it was alleged to be engaged. From the
standpoints of deterrence and compensation to those harmed by exclusion,
it is preferable to assign liability to smaller members of the scheme,
as well as the larger defendants.
Our claim is not that industry-wide exclusive dealing or tying,
when it occurs, is usually an anticompetitive act. In particular, many
ties are procompetitive, and industry-wide tying is common. Our point is
that the inquiry should focus on evidence of harm, rather than evidence
Our examination has implications not only for direct prohibitions
on exclusionary conduct, but also for merger policy. One goal of
horizontal merger control is to prevent reductions of competition
through “coordinated effects.” (277) The basic idea is that if
a merger leaves fewer competitors remaining, it will be easier for them
to coordinate in a manner that reduces competition. The risk of future,
post-transaction coordination is a reason to prohibit a merger, even if
the coordinated effects are not themselves actionable as concerted
activity. Indeed, it is a prophylactic concern about future coordinated
effects, not themselves directly reachable under the Sherman Act, that
partly motivates merger control.
Attention to parallel exclusion expands the domain of coordinated
effects. The most familiar form of reduced competition is a coordinated
price increase. But parallel exclusion is a coordinated effect as well.
For example, in 2011, two leading providers of wireless services,
AT&T and T-Mobile, announced a $39 billion proposed merger of their
wireless operations. (278) The transaction raised antitrust concerns
from regulators, who took the view that the merger would reduce the
number of major carriers from four to three. The increased concentration
would, it was argued, make it easier for the remaining three players to
coordinate their activity, reducing competition among them. (279)
The Department of Justice and FCC each opposed the merger, based in
part on concerns about coordinated effects. (280) FCC staff expressed
concern about an increased capacity for parallel exclusion-in
particular, that the two largest postmerger firms, AT&T and Verizon
Wireless, in the past had exhibited a pattern of “parallel
decisions making expansion by smaller competitors or entry by new
providers more difficult.” (281)
The FCC’s examples of exclusionary conduct included the
carriers’ refusal, in parallel, to offer roaming or wholesale
services to smaller carriers or providers that might need such services
to compete effectively.(282) That history gave rise to a prediction that
after a merger, the problem of parallel exclusion would be worse. (283)
The report also expressed concern about a second form of parallel
exclusion, namely that AT&T and Verizon Wireless would have the
increased incentive and ability to exclude competitors from access to
new handsets and devices. (284)
Our analysis identifies parallel exclusion as a potential
coordinated effect that should be evaluated in any horizontal merger. At
present, the increased opportunity for parallel exclusion is missing
from the Horizontal Merger Guidelines, the enforcement agencies’
detailed explanation of how they evaluate mergers of competitors. (285)
However, given the Guidelines’ explicit attention to
anticompetitive exclusion by a single dominant firm and to lost
innovation, (286) parallel exclusion is an appropriate expansion of the
D. The Insufficiency of Horizontal Agreement
As discussed at length above, a horizontal agreement among
excluders is not necessary for an anticompetitive effect from parallel
exclusion. Seeking out such an agreement is an unhelpful distraction. We
therefore recommend that any horizontal agreement requirement, as a
doctrinal requirement for parallel exclusion, be jettisoned or weakened.
If horizontal agreement is not necessary, should it be sufficient?
A line of Supreme Court authority suggests that a horizontal agreement
to exclude gives rise to per se antitrust liability. For example, in
United States v. General Motors Corp., (287) a group of Chevrolet
dealers acted in concert to persuade General Motors to cut off
discounters who were acting in violation of “location clauses”
between GM and its dealers that protected the dealers from such
competition. The Court found the arrangement per se illegal, declaring
it irrelevant whether the business practices at stake-both the location
clause and the franchise system more generally-were desirable. (288) As
the Court explained, “where businessmen concert their actions in
order to deprive others of access to merchandise which the latter wish
to sell to the public, we need not inquire into the economic motivation
underlying their conduct.” (289)
We reject this line of cases. The mere fact that firms have banded
together is not particularly informative; the key question is what
effect results from their conduct. As we have explained, not all
exclusion is anticompetitive exclusion. For one thing, much exclusion
has no effect on competition, as when an intrabrand restraint is kept in
check by the presence of interbrand competition. Put another way, the
dealers, considered collectively, may have lacked market power. Second,
there are procompetitive explanations even for certain conduct that has
an exclusionary effect. For example, the excluding dealers were
apparently forced to service, for free, the cars sold by discounters.
(290) The Court erred in ignoring these issues.
It follows, then, that horizontal agreement is not a sufficient
condition for parallel exclusion liability, just as it is not a
necessary condition, (291) This point is consistent with
commentators’ criticism of the Court’s imposition of per se
liability in cases where exclusive territories are allocated for the
effective marketing of a single brand. (292) Once again, the point is
that horizontal agreement among the excluders tells us relatively little
about the conduct of concern.
Parallel exclusion is a neglected category in antitrust analysis.
That neglect is unfortunate, because the harms of parallel exclusion can
exceed those of the more frequently discussed and litigated problem of
parallel pricing. Parallel exclusion persists either as a repeated
prisoner’s dilemma or because exclusion is a dominant strategy for
each firm. Current antitrust doctrine is poorly suited to address the
problem of parallel exclusion, in part due to its overemphasis on
horizontal agreement as a necessary or sufficient condition for
anticompetitive exclusion (though we do not think horizontal agreement
is entirely irrelevant (293)). We have suggested several changes that
would remedy the problem.
Our analysis contributes to the increased recognition that
monopolists should not be singled out for uniquely harsh treatment under
antitrust law. In an earlier time, a monopolist was understood to have
an unusual, special responsibility in the conduct of its affairs,
including the avoidance of overly aggressive competition. (294) That
view has steadily eroded, as courts recognize that a monopolist, just
like other firms, should be free to compete aggressively on the merits.
(295) Our analysis reinforces the similar treatment of oligopolists and
monopolists from another angle, by emphasizing the conditions under
which oligopolists can engage in exclusion, just like monopolists.
Our analysis also raises doubts about the claim, sometimes made
about parallel conduct, that the marketwide nature of conduct is a
defense against antitrust liability. (296) The fact that a practice is
marketwide is not, in itself, necessarily reassuring. It might be a
marketwide exclusionary device. (297) Similarly, a device’s
persistence over time tends to demonstrate its effectiveness, but that
is not the same thing as a demonstration of its efficiency.
Our analysis points to a broad agenda for both academics and
enforcers. There is an extensive academic literature about the adoption
and stability of parallel pricing and related instruments for reducing
competition among oligopolists. But we lack a similarly robust
understanding of parallel exclusion. When is exclusion initiated, and by
whom? Are the exclusion decisions simultaneous or sequential? To what
extent do these differences affect the timing and likelihood of
defection and collapse?
As for antitrust enforcers, we believe they have sometimes been
reluctant to even consider parallel conduct cases, based on the premise
that Turner “won” the debate with Posner, demonstrating that
such cases are impracticable unless there is clear evidence of
agreement. Turner thought no such thing, and we have shown here that
this misunderstanding misses much, including the crucial distinction
between pricing cases and exclusion cases, and the relative irrelevance
of horizontal agreement. We hope that enforcers take our analysis as a
call to arms-a mandate to investigate allegations of parallel exclusion
with the same intensity and discipline brought to the examinations of
solitary dominant firms.
(1.) See Richard A. Posner, Oligopoly and the Antitrust Laws: A
Suggested Approach, 21 STAN. L. REV. 1562 (1969); Donald F. Turner, The
Definition of Agreement Under the Sherman Act: Conscious Parallelism and
Refusals To Deal, 75 HARV. L. REV. 655, 677-81 (1962) [hereinafter
Turner, Definition] ; Donald F. Turner, The Scope of Antitrust and Other
Economic Regulatory Policies, 82 HARV. L. REV. 1207 (1969) [hereinafter
Turner, Scope]; infra Section I.C (discussing the Turner-Posner debate
and later analyses).
(2.) See infra Section II.B (discussing these harms and their
(3.) See infra Section I.B (presenting examples).
(4.) See infra Section I.A (exploring the literature).
(5.) 15 U.S.C. S 2 (2006) (“Every person who shall monopolize,
or attempt to monopolize, or combine or conspire 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
(6.) See infra Section IV.B (describing the doctrine and advocating
(7.) Turner, Scope, supra note 1, at 1230.
(8.) See, e.g., RICHARD A. POSNER, ANTITRUST LAW 40-41 (2d ed.
200l) (identifying the “fundamental” distinction between
“collusive practices” and “exclusionary practices”);
Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive Exclusion:
Raising Rivals’ Costs To Achieve Power over Price, 96 YALE L.J.
209, 211 (1986) (noting that antitrust prohibits “undue collusion
among competitors and unjustifiable exclusion of competing firms”).
(9.) E.g., POSNER, supra note 8, at 40-41 (“An exclusionary
practice is generally a method by which a firm having a monopoly
position invests some of its monopoly profits in making it unprofitable
for other sellers to compete with it, thus perpetuating its
monopoly.”); Krattenmaker & Salop, supra note 8, at 213-14
(arguing that exclusion occurs when a “defendant firm” places
competitors at “a cost disadvantage,” thereby increasing the
monopolist’s ability to raise price).
(10.) See POSNER, supra note 8, at 40 (exclusionary practices
entail “coercion of sellers outside of the collusive group”
(11.) See id. at 265 (“Exclusive dealing poses a threat to
competition only when it is done by a monopolist. …”); Frank H.
Easterbrook, On Identifying Exclusionary Conduct, 61 NOTRE DAME L. REV.
972 (1986) (discussing exclusionary conduct only in the context of a
single dominant firm); sources cited supra note 9. Similarly, when
courts consider exclusion, they often limit attention to the
dominant-firm case. See, e.g., Leegin Creative Leather Prods., Inc. v.
PSKS, Inc., 551 U.S. 877, 893 (2007) (evaluating exclusion-based
theories of resale price maintenance only by reference to a single
“powerful manufacturer or retailer”).
(12.) See POSNER, supra note 8, at 40 (defining “pure”
collusive practice as cooperation to raise price, which “carries
the seeds of its own destruction” by attracting entry); George J.
Stigler, A Theory of Oligopoly, 72 J. POL. ECON. 44, 45 (1964) (adopting
the assumption that “collusion takes the form of joint
determination of outputs and prices by ostensibly independent
firms,” and noting alternative strategies of merger or joint sales
agency);id. at 47 (characterizing the problem of internal detection as
one of policing “price-cutters”).
(13.) E.g., E.I. du Pont de Nemours & Co. v. FTC, 729 F.2d 128
(2d Cir. 1984). Similarly, many instances of “shared monopoly”
or “collective dominance,” as those terms are commonly used,
have no prospect of self-entrenchment. E.g., Barry E. Hawk & Giorgio
A. Motta, Oligopolies and Collective Dominance: A Solution in Search of
a Problem, in TREVISO CONFERENCE ON ANTITRUST BETWEEN EC LAW AND
NATIONAL LAW 59 (8th ed. 2008); George A. Hay, Oligopoly, Shared
Monopoly, and Antitrust Law, 67 CORNELL L. REV. 439 (1982).
(14.) E.g., Interstate Circuit, Inc. v. United States, 306 U.S. 208
(1939). In Interstate Circuit, the multiple distributors acting in
parallel were not doing so to entrench themselves, but rather were
acting for the benefit and at the behest of a customer.
(15.) POSNER, supra note 8, at 238 (“The antitrust boycott
cases involve an extraordinarily heterogeneous body of practices.
…”); Kenneth L. Glazer, Concerted Refusals To Deal Under Section
I of the Sherman Act, 70 ANTITRUST L.J. 1, 1 (2002) (describing the
(16.) E.g., Klor’s, Inc. v. Broadway-Hale Stores, 359 U.S. 207
(1959); Toys “R” Us, Inc. v. FTC, 221 F.3d 928 (7th Cir.
(17.) Cf., e.g., FTC v. Ind. Fed’n of Dentists, 476 U.S. 447,
449-50 & n.1 (1986) (finding a violation where a group of dentists
collectively refused to submit x-rays to insurance companies).
(18.) Glazer calls these “rival-directed” boycotts.
Glazer, supra note 15, at 3, 14-18. Examples include Radiant Burners,
Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656 (1961) (per
curiam), concerning an association of manufacturers who denied quality
certification to a competing manufacturer; Fashion Originators’
Guild of America, Inc. v. FTC, 312 U.S. 457 (1941), involving an
association of dress manufacturers who agreed not to sell to retailers
who bought from competing manufacturers of “knockoff”
clothing; and Eastern States Retail Lumber Dealers’ Ass’n v.
United States, 234 U.S. 600 (1914), regarding an association of lumber
dealers who agreed among themselves not to buy from wholesalers who
competed by selling directly to customers.
(19.) E.g., Associated Press v. United States, 326 U.S. 1 (1945);
United States v. Terminal R.R. Ass’n, 224 U.S. 383 (1912).
(20.) In the analogous context of price elevation, Stigler briefly
noted the existence of joint sales agencies as a means of coordination,
but focused instead on price elevation achieved without resort to such
an explicit mechanism. Stigler, supra note 12, at 4521.
(21.) E.g., JOSEPH E. HARRINGTON, JR., How DO CARTELS OPERATE?
64-69 (2006) (providing European examples of attempts by cartels to
exclude nonmembers); James W. Brock, Antitrust Pollo, and the Oligopoly
Problem, 51 ANTITRUST BULL. 227 (2006) (focusing primarily on price
elevation by oligopolists in several industries, but also assembling
evidence of exclusion) ; Margaret C. Levenstein & Valerie Y. Suslow,
What Determines Cartel Success?, 44 J. ECON. LITERATURE 43, 74-75 (2006)
(describing exclusionary practices, particularly by enlisting the aid of
government, as a means to ensure cartel stability).
(22.) For an economic model and empirical analysis of multiple
excluders using exclusive dealing contracts, see Laura Nurski &
Frank Verboven, Exclusive Dealing as a Barrier to Entry? Evidence from
Automobiles (Ctr. for Econ. Policy Research, Discussion Paper No. 8762,
2012), http://ssrn.com/abstract=1988693. For an analysis of
“cumulative foreclosure” in exclusive contracting, see EINER
ELHAUGE, UNITED STATES ANTITRUST LAW AND ECONOMICS 343-46 (2d ed. 2010);
Einer Elhauge, Tying, Bundled Discounts, and the Death of the Single
Monopoly Profit Theory, 123 HARV. L. REV. 397, 476-77 (2009)
[hereinafter Elhauge, Tying]; and Einer Elhauge, Antitrust Analysis of
GPO Exclusionary Agreements: Comments Regarding Hearings on Health Care
and Competition Law and Policy -Statement for DOJ-FTC Hearings on GPOs,
FTC 3 (Sept. 26, 2003),
[hereinafter Elhauge, GPO]. For legal analysis of an agreement among
competitors to engage in tying, see Christopher R. Leslie, Tying
Conspiracies, 48 WM. & MARY L. REV. 2247, 2259-60 (2007). For a
model of multiple excluders that employ “meet-or-release”
contracts, see Edward M. Iacobucci & Ralph A. Winter, Collusion on
Exclusion (Jan. 11, 2012) (unpublished manuscript) (on file with
authors). For an economic analysis of exclusionary bundling of academic
journals by multiple publishers, see Aaron S. Edlin & Daniel L.
Rubinfeld, Exclusion or Efficient Pricing? The “Big Deal”
Bundling of Academic Journals, 72 ANTITRUST L.J. 119, 152 (2004). Early
examinations of predatory pricing by oligopolists include work by
Phillip Areeda, Donald Turner, and Oliver Williamson. See Phillip Areeda
& Donald F. Turner, Predatory Pricing and Related Practices Under
Section 2 of the Sherman Act, 88 HARV. L. REV. 697, 712 11.35 (1975)
(“In an oligopoly situation it would be difficult if not impossible
to distinguish ‘disciplinary’ price-cutting from an outbreak
of competitive pricing under the pressures of excess
capacity’.”); Oliver E. Williamson, Predatory Pricing: A
Strategic and Welfare Analysis, 87 YALE L.J. 284, 292 (1977)
(“Although behavior akin to predatory pricing can appear in loose
oligopolies or even in competitively organized industries, such behavior
… must be distinguished from the strategic efforts to acquire
long-term market power that characterize predatory, behavior by dominant
firms and collusive oligopolies.”).
(23.) See Randal D. Heeb et al., Cartels as as Two-Staqe
Mechanisms: Implications for the Analysis el Dominant-Firm Conduct, 10
CHI. J. INT’L L. 213, 216-17 (2009) (arguing that cartels first
suppress interfirm rivalry, then move on to exclusionary behavior, and
presenting evidence of exclusionary behavior by cartels); William E.
Kovacic et al., Plus Factors and Agreement in Antitrust Law, 110 MICH.
L. REV. 393 (2011); Robert C. Marshall, Leslie M. Marx & Lily
Samkharadze, Dominant-Firm Conduct by Cartels 2-3 (Feb. 15, 2011)
http://www.econ.psu.edu/~1xs951/dominantfirtn.pdf (presenting a model of
cartel behavior in which “concordant” cartels, in which
within-cartel rivalry is successfully suppressed, arc more likely to
also engage in exclusionary conduct). One implication of these analyses,
which we take up in Part IV, is that the observable exclusionary conduct
can serve to identify otherwise unobservable price-fixing.
(24.) Edward M. Iacobucci & Ralph A. Winter, Abuse of Joint
Dominance in Canadian Competition Policy, 60 U. TORONTO L.J. 219 (2010).
(25.) They were not the first to offer a general-purpose credit
card, a model pioneered by the Diner’s Club. The Visa card,
moreover, was originally known as Bankamericard. See Lewis MANDELL, THE
CREDIT CARD INDUSTRY: A HISTORY 1-10, 31 (1990). At the beginning, Visa
demanded exclusivity of its banks, but after antitrust litigation and
pressure from the Department of Justice, Visa amended its rules, and
both the Visa and MasterCard networks became open to any bank wishing to
join. Id. at 40-4L
(26.) As discussed in Section III.B, infra, parallel exclusion can
also arise where the excluders are monopolists, each with a limited
territory (in geographic or product terms), such that each has an
interest in excluding an entrant that will compete with all of them.
(27.) See United States v. Visa U.S.A., Inc., 344 F.3d 229,236 (2d
(28.) See id. at 237. Similar exclusion was alleged as to the
issuance of competing Discover cards. Id. at 234; see also SCFC ILC,
Inc. v. Visa U.S.A., Inc., 36 F.3d 958 (10th Cir. 1994) (finding that
Visa’s refusal to permit Discover to join the Visa network did not
violate antitrust law).
(29.) In this case, the agreement requirement was easily met
because the banks were also the owners of each network. United States v.
Visa, 344 F.3d at 242-43. On market power, the Second Circuit concluded
that the two networks had power “jointly and separately.” Id.
(30.) See CHRISTINA BOHANNAN & HERBERT HOVENKAMP, CREATION
WITHOUT RESTRAINT: PROMOTING LIBERTY AND RIVALRY IN INNOVATION 250
(2012) (describing these advantages).
(31.) Allied Tube & Conduit Corp. v. Indian Head, Inc. (Allied
Tube H), 486 U.S. 492, 495-96 (1988); Indian Head, Inc. v. Allied Tube
& Conduit Corp. (Allied Tube I), 817 F.2d 938, 939-40 (2d Cir.
1987). The issue, as it came to the Supreme Court, was the applicability
of the Noerr-Pennington doctrine, a question not important to this
(32.) Allied Tube II, 486 U.S. at 496-97; Allied Tube I, 817 F.2d
(33.) The examples were compiled from a wide range of sources.
Several of the cases are discussed in Leslie, supra note 22, at 2256-60.
(34.) Kellogg Co., 99 F.T.C. 8 (1982).
(35.) Report on the Federal Trade Commission Workshop on Slotting
Allowances and Other Marketing Practices in the Grocery, Industry, FED.
TRADE COMMISSION (Feb. 200l),
(36.) United States v. Am. Can Co., 87 F. Supp. 18 (N.D. Cal.
(37.) Rosebrough Monument Co. v. Mem’l Park Cemetery
Ass’n, 666 F.2d 1130 (8th Cir. 1981).
(38.) Am. Tobacco Co. v. United States, 328 U.S. 781, 803-04
(39.) Allied Tube II, 486 U.S. 492, 496 (1988).
(40.) United States v. Paramount Pictures, Inc., 334 U.S. 131
(41.) Genico, Inc. v. Ethicon, Inc., No. 5:04-CV-229, 2006 U.S.
Dist. LEXIS 96909 (E.D. Tex. Mar. 23, 2006); Elhauge, GPO, supra note
(42.) United States v. Visa U.S.A., Inc., 344 F.3d 229 (2d Cir.
(43.) Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96 (2d
(44.) Standard Oil Co. of Cal. v. United States (Standard
Stations), 337 U.S. 293 (1949)
(45.) Exxon Corp., 98 F.T.C. 453 (1981).
(46.) JTC Petroleum Co. v. Piasa Motor Fuels, Inc., 190 F.3d 775
(7th Cir. 1999).
(47.) FTC v. Coca-Cola Co., 641 F. Supp. 1128, 1136 (D.D.C. 1986);
Lawrence J. White, Application of the Merger Guidelines: The Proposed
Merger of Coca-Cola and Dr. Pepper, in THE ANTITRUST REVOLUTION: THE
ROLE OF ECONOMICS 76 (John E. Kwoka, Jr. & Lawrence ]. White eds.,
2d ed. 1986).
(48.) Int’l Bus. Machs. Corp. v. United States, 298 U.S. 131
(49.) Bell Atl. Corp. v. Twombly, 550 U.S. 544, 553-54 (2007).
50. In re Wireless Tel. Servs. Antitrust Litig., 385 F. Supp. 2d
403 (S.D.N.Y. 2005).
(51.) Letter from Barbara van Schewick, Assoc. Professor, Stanford
Law Sch., to Julius Genachowsld, Chairman, Fed. Commc’n.
Comm’n (Dec. 19, 2011) (on file with authors).
(52.) Comm’r of Competition & Waste Serv. (CA) Inc. and
Waste Mgmt. of Can. Corp., CT-2009-003 (Competition Trib. 2009),
discussed in Iacobucci & Winter, supra note 22, at 23-25.
(53.) See, e.g., POSNER, supra note 8, at 60-69; Alexis Jacquemin
& Margaret E. Slade, Cartels, Collusion, and Horizontal Merger, in 1
HANDBOOK OF INDUSTRIAL ORGANIZATION 415 (Richard Schmalensee &
Robert D. Willig eds., 1989) (reviewing factors that promote cartel
stability.); Carl Shapiro, Theories of Oligopoly Behavior, in 1 HANDBOOK
OF INDUSTRIAL ORGANIZATION, supra, at 329 (surveying economic theories
of oligopoly behavior); Stigler, supra note 12, at 48-56.
(54.) See sources cited supra note 1.
(55.) 15 U.S.C. S 1 (2006).
(56.) Louis Kaplow, Direct Versus Communications-Based Prohibitions
on Price Fixing, 3 J. LEGAL ANALYSIS 449,451 (2011).
(57.) E.g., Kovacic et al., supra note 23, at 395; Turner,
Definition, supra note t, at 663.
(58.) See, e.g., Posner, supra note 1, at 1575-76 (“There is
no distortion of accepted meanings … in viewing what I have termed
tacit collusion as a form of concerted rather than unilateral
activity.”); Turner, Definition, supra note 1, at 671 (”
[W]hile there are arguable grounds for saying there is no agreement,
there are far better grounds for saying that though there may be
‘agreement’ it is not unlawful agreement.”); id. at 681
(accepting that interdependence is a basis for finding agreement, but
arguing that more is required for finding an “unlawfull
conspiracy” under the Sherman Act).
(59.) See Turner, Definition, supra note 1, at 672 (“The
conclusion that noncompetitive oligopoly pricing is not unlawful means
that mere interdependence of basic price decisions is not
(60.) Id. at 669 (“[S]uch an injunction, read literally,
appears to demand such irrational behavior that full compliance would be
(61.) See In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d
651, 654 (7th Cir. 2002) (“[I]t is generally believed, and the
plaintiffs implicitly accept, that an express, manifested agreement, and
thus an agreement involving actual, verbalized communication, must be
proved in order for a price-fixing conspiracy to be actionable under the
(62.) Posner, supra note 1, at 1562; see also id. at 1575
(“There is … no vital difference between formal cartels and tacit
collusive arrangements; the latter are simply easier to conceal.”).
(63.) Id. at 1590-91.
(64.) See Kaplow, supra note 56, at 450 (advocating that antitrust
policy target “socially harmful coordinated price elevation that
can be detected and sanctioned effectively”).
(65.) Id. at 449-50 (identifying the tendency of courts to focus on
penalizing “certain sorts of interfirm communications that
facilitate coordinated oligopolistic price elevation”).
(66.) See, e.g., Louis Kaplow, On the Meaning of Horizontal
Agreements in Competition Law, 99 CALIF. L. REV. 683, 758, 813-14 (2011)
(under certain conditions, a narrow agreement requirement “relieves
from liability a wide swath consisting of all of the cases posing the
greatest danger,” while imposing liability for cases posing less
(67.) Id. at 758. This line of thinking has also been pursued in 6
PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW [paragraph]
1432bl (2d ed. 2003), which laments this “perverse” result on
the ground that “the more concentrated market makes the agreement
unnecessary, and thus the conduct can be explained without it”; and
Jonathan B. Baker, Two Sherman Act Section 1 Dilemmas: Parallel Pricing,
the Oligopoly Problem, and Contemporary, Economic Theory,, 38 ANTITRUST
BULL. 143, 180-86 (1993).
(68.) Kaplow, supra note 66, at 758-65.
(69.) Posner, supra note 1, at 1562 (“The problem is: What
rules and remedies are necessary to prevent supracompetitive prices in
oligopolies, markets in which a few sellers account for most of the
(70.) Kaplow, supra note 56, at 450 n.2 (“Attention is
confined to coordination on price.”).
(71.) See Turner, Definition, supra note 1, at 677-78. Turner
considered several instances of parallel exclusion, including American
Tobacco Co. v. United States, 328 U.S. 781 (1946), in which each
oligopolist cigarette manufacturer allegedly purchased more tobacco than
it needed in order to exclude discount cigarette makers. See Turner,
Definition, supra note 1, at 677-78. We discuss this case in the text
accompanying notes 93-100, infra. In later work, Turner discussed a
hypothetical based on United States v. United Shoe Machinery Corp., 391
U.S. 244 (1968). See Turner, Scope, supra note 1, at 1228-30.
(72.) Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
(73.) Id. at 549, 551, 567-69*
(74.) Id. at 550-51, 566-67.
(75.) This is an example of alleged parallel exclusion involving
local monopolists, rather than oligopolists. See infra Section III.B for
(76.) For an example of its application to parallel exclusion, see
In re Insurance Brokerage Antitrust Litigation, 618 F.3d 300, 324-25
& n.25 (3d Cir. 2010), which stated that Twombly abrogated Bogosian
v. Gulf Oil Corp., 561 F.2d 434, 445-46 (3d Cir. 1977), an earlier case
that took a lenient view at the pleading stage in evaluating an alleged
(77.) United States v. Microsoft Corp., 253 F.3d 34, 58 (D.C. Cir.
2001) (en banc) (per curiam).
(78.) For an introduction, see MICHAEL D. WHINSTON, LECTURES ON
ANTITRUST ECONOMICS 133-97 (2006).
(79.) One mechanism of exclusion has always been primarily
associated with oligopoly. A “meeting competition” clause
gives a seller the option to retain a buyer’s business by matching
any lower price offered by a rival seller. Such a clause can have the
effect of maintaining high prices by oligopolists by lowering the
profitability of attempted defections. But it also limits the incursion
of new entrants by providing a trigger strategy that applies to
unwelcome outsiders as well as insiders. For a discussion, see Steven C.
Salop, Practices that (Credibly) Facilitate Oligopoly Co-ordination, in
NEW DEVELOPMENTS 1N THE ANALYSIS OF MARKET STRUCTURE 265, 279-82 (Joseph
E. Stiglitz & G. Frank Mathewson eds., 1986). For a formal model,
see Iacobucci & Winter, supra note 22.
(80.) For a related categorization, see Jonathan B. Baker,
Exclusion as a Core Competition Concern, 78 ANTITRUST L.J. (forthcoming
2013) (manuscript at 10-14), http://ssrn.com/abstract=2001579, which
assesses exclusion mechanisms in terms of three overlapping categories:
acting on one’s own, buying a right from nonrivals, and altering
(81.) See MCI Commc’ns Corp. v. AT&T Co., 462 F. Supp.
1072 (N.D. Ill. 1978).
(82.) Cf. Susan A. Creighton et al., Cheap Exclusion, 72 ANTITRUST
L.J. 975, 976 n.7 (2005) (noting that exclusion “can be achieved by
either collusive or unilateral means”).
(83.) See, e.g., Eric B. Rasmusen, J. Mark Ramseyer & John S.
Wiley, Jr., Naked Exclusion, 81 AM. ECON. REV. 1137, 1137 (1991); Ilya
R. Segal & Michael D. Whinston, Naked Exclusion: Comment, 90 AM.
ECON. REV. 296, 297 (2000); John Simpson & Abraham L. Wickelgren,
Naked Exclusion, Efficient Breach, and Downstream Competition, 97 AM.
ECON. REV. 1305, 1305 (2007).
(84.) United States v. Microsoft Corp., 253 F.3d 34, 59-64 (D.C.
Cir. 2001) (en banc) (per curiam); see also United States v. Dentsply
Int’l, Inc., 399 F.3d 181, 187-97 (3d Cir. 2005) (imposing
liability, for exclusive dealing by a dominant firm).
(85.) Krattenmaker & Salop, supra note 8, at 214.
(86.) United States v. Visa U.S.A., Inc., 344 F.3d 229,237 (2d Cir.
(87.) For the facts, see Commission Decision 93/82, 1993 O.J. (L
34) 20 (EC), http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:
1993 :034:0020 :0043:EN:PDF.
(88.) CEWAL also featured a quasi-regulatory exclusionary
mechanism. The shipping conference managed to convince or coerce the
Zairian shipping authority to require that all goods carried between its
ports and Northern Europe be carried on CEWAL vessels. When the Zairian
authority decided to break with CEWAL to allocate two percent of the
trade to a non-CEWAL shipper, CEWAL threatened the agency with various
forms of retaliation, such as refusing to pay fees due, so as to prevent
any further slippage. See id. at 25-26.
(89.) Id. at 26.
(90.) See WHINSTON, supra note 78, at 144-47.
(91.) Simpson & Wickelgren, supra note 83, at 1306-07.
(92.) Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549
U.S. 312, 325-26 (2007) (specifying conditions under which predatory
overbuying violates antitrust law).
(93.) See United States v. Am. Tobacco Co., 221 U.S. l06 (1911)
(ordering the dissolution of the American Tobacco Company).
(94.) Am. Tobacco Co. v. United States, 328 U.S. 781, 803-04
(1946). This was one of many complaints against the firms.
(95.) Id. at 806-08.
(96.) Id. at 803 (“[W]hen the manufacturers of lower priced
cigarettes were beginning to manufacture them in quantity, the
petitioners commenced to make large purchases of the cheaper tobacco
leaves used for [their] manufacture. … No explanation was offered as
to how or where this tobacco was used by petitioners.”).
(98.) Id. at 804.
(99.) Id. at 800.
(100.) Id. at 789 (noting that conspiracy “was established,
not through the presentation of a formal written agreement, but through
the evidence of widespread and effective conduct” by the Big
Three); id. at 800 (“[A]lthough there was no written or express
agreement discovered among [the Big Three] their practices included a
clear course of dealing … [that] evidently convinced the jury of the
existence of a combination or conspiracy. …”); see also id. at
809 (“It is not the form of the combination or the particular means
used but the result to be achieved that the statute condemns.”).
(101.) United States v. Microsoft Corp., 253 F.3d 34, 64-67, 84-97
(D.C. Cir. 2001) (en banc) (per curiam).
102. This is the case when some customers of the tied good do not
also demand the tying good, and where depriving the rival access to
“captive” customers weakens it and thereby provides additional
profit opportunities in the tied good. Michael D. Whinston, Tying,
Foreclosure, and Exclusion, 80 AM. ECON. REV. 837, 840 (1990). For a
nontechnical treatment, see Dennis W. Carlton, A General Analysis of
Exclusionary Conduct and Refusal To Deal- Why Aspen and Kodak Are
Misguided, 68 ANTITRUST L.J. 659, 667-68 (2001). Carlton calls this the
“desert island” story, which he attributes to Robert Gertner.
Id. at 667 n.19. See generally Elhauge, Tying, supra note 22 (discussing
a range of circumstances where tying reduces welfare).
(103.) For an early statement of what has come to he known as the
“one monopoly profit” result, see Aaron Director & Edward
H. Levi, Law and the Future: Trade Regulation, 51 Nw. U. L. REV.
(104.) Among other sources of efficiency, tying is a means to avoid
double marginalization, in which two firms offering complementary goods
fail to take each other’s pricing decisions into account, resulting
in higher price and lower quantity, compared to a single seller offering
both goods. JEAN TIROLE, THE THEORY OF INDUSTRIAL ORGANIZATION 174-75
(105.) See Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96
(2d Cir. 2005); In re Visa Check/Mastermoney Antitrust Litig., 280 F.3d
124 (2d Cir. 2001); In re Visa Check/Mastermoney Antitrust Litig., 297
F. Supp. 2d 503 (E.D.N.Y. 2003).
(106.) In re Visa Check/Mastermoney Litig., 192 F.R.D. 68, 72
(107.) Id. at 72-73.
(108.) Wal-Mart Stores, 396 F.3d at 101.
(110.) See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551
U.S. 877, 897 (2007); see also EUROPEAN COMM’N, GUIDELINES ON
VERTICAL RESTRAINTS [paragraph] 100, at 32 (2010).
(111.) John Asker & Heski Bar-Isaac, Vertical Practices
Facilitating Exclusion (NYU Stern Working Paper No. EC-12-20, 2012),
/workingpapers/2012/Asker_BarIsaac-VerticalPractices Oct2012.pdf; see
also B.S. YAMEY, THE ECONOMICS OF RESALE PRICE MAINTENANCE 5-6, 34
(1954) (describing the use of resale price maintenance (RPM) by
manufacturers to “dispos[e] some distributors more favourably
towards their brands” and thereby “hinder the entry of new
firms or growth of excluded firms”).
(112.) Benjamin Klein & Kevin M. Murphy, Vertical Restraints as
Contract Enforcement Mechanisms, 31 J.L. & ECON. 265, 265-66 (1988).
(113.) Asker & Bar-Isaac, supra note 111, at 25.
(114.) Howard P. Marvel & Stephen McCafferty, The Welfare
Effects of Resale Price Maintenance, 28 J.L. &ECON. 363, 366 (1985).
(116.) Id. at 367 (“The desire to deny distribution to rivals
has seemed to careful students the most plausible explanation for the
use of RPM in the sugar trade.”) ; see also ALFRED S. EICHNER, THE
EMERGENCE OF OLIGOPOLY: SUGAR REFINING AS A CASE STUDY 193 (1969)
(noting the scheme’s effect as an impediment to new entry in
(117.) ALLAN M. BRANDT, THE CIGARETTE CENTURY: THE RISE, FALL, AND
DEADLY PERSISTENCE OF THE PRODUCT THAT DEFINED AMERICA 34 (2007).
(118.) RICHARD B. TENNANT, THE AMERICAN CIGARETTE INDUSTRY: A STUDY
IN ECONOMIC ANALYSIS AND PUBLIC POLICY 49 (1950). The tactics used to
maintain dominance included a variety of punishments to ensure that
retailers did not cut prices, such as revoking rebates and denying the
future supply of cigarettes. Id. at 304-06.
(119.) Id. at 305 (“The policy of the Trust seems to have been
aimed both at securing its monopoly position by controlling distributors
and at preventing indiscriminate price cutting.”).
(120.) Seeks To Reopen Tobacco Decree, N.Y. TIMES, Jan. 4, 1914, at
(121.) TENNANT, supra note 118, at 309-11. Reynolds did not join
the scheme, which made it fragile. See id. at 310.
(122.) Am. Tobacco Co. v. FTC, 9 F.2d 570 (2d Cir. 1925).
(123.) See TENNANT, supra note 118, at 310-ll (concluding that the
prospect of further litigation, combined with competition from Reynolds,
brought an end to the practice).
(124.) Id. at 353-66.
(125.) The term is an apparent reference to the similar provision
in international trade agreements.
(126.) Shalini Ramachandran, ‘Favored Nations’ Fight for
Online Digital Rights, WALL ST. J., June 14, 2012, at B3,
http://online.wsj.com/article/SB10001424052702303410404577466940749077080.html (“Initially about economic terms, clauses are now being
negotiated around digital rights. …”).
(127.) Jonathan B. Baker, Vertical Restraints with Horizontal
Consequences: Competitive Effects of “Most-Favored-Customer”
Clauses, 64 ANTITRUST L.J. 517, 531-32 (1996).
(128.) Id. at 523-25. See generally Fiona Scott-Morton, Deputy
Assistant Att’y Gen., Dep’t of Justice, Speech at Georgetown
University Law Center Antitrust Seminar: Contracts that Reference Rivals
11-14 (Apr. 5, 2012) (transcript available at
theory and evidence that most favored nation (MFN) provisions can have
exclusionary effects). This is not the only potential anticompetitive
effect. MFN clauses can also facilitate price elevation among sellers.
Salop, supra note 79, at 273-79.
(129.) For an example of antitrust enforcement, see Competitive
Impact Statement, United States v. Delta Dental of Rhode Island, 943 F.
Supp. ]72 (D.R.I. 1996) (No. 96-113P),
http://www.justice.gov/atr/cases/f1000/1074.htm. Here, the entrant had
reason to expect that it could get a better price than the incumbent,
with respect to a particular set of dentists, by guaranteeing higher
volume. See also United States v. Comcast Corp., NO. 11:1-CV-106, 2011
WL 5402137, at “10-ll (D.D.C. Sept. 1, 2011) (prohibiting, as a
condition of permitting a joint venture between Comcast and NBC
Universal, certain agreements that reduce the incentive for other firms
to provide content to online video distributors); Applications of
Comcast Corp., Gen. Elec. Co. & NBC Universal, Inc., 26 F.C.C. 4238,
4361 (20]1) (same).
(130.) See Scott-Morton, supra note 128, at 11-14 (noting the
feasibility of exclusionary effect in both single-firm and multiple-firm
(131.) See, e.g., Thomas Catan & Amy Schatz, U.S. Probes Cable
for Limits on Net Video, WALL ST. J., June 13, 2012, at A1,
http://online.wsj.com/article/SBl00014240527o2303444204577462951166384624.html (reporting a Department of Justice investigation into whether MFN
clauses, required by cable companies, “stop programmers from
experimenting with other forms of online distribution”);
Ramachandran, supra note 126 (discussing entrants’ difficulties in
(132.) For a discussion of deadweight loss and other harms of
oligopolistic price elevation, see Louis Kaplow, An Economic Approach to
Price Fixing, 77 ANTITRUST L.J. 343,353 (2011).
(133.) See BOHANNAN & HOVENKAMP, supra note 30, at 250
(describing “collusive innovation restraints”); Einer Elhauge,
The Exclusion of Competition for Hospital Sales Through Group Purchasing
Organizations (June 25, 2002) (unpublished manuscript), http
June_2002.pdf (“[B]y far the bigger cost of such exclusionary
agreements is that they are likely to prevent all sorts of innovative
products from ever being created.”).
(134.) Robert M. Solow, Technical Change and the Aggregate
Production Function, 39 REV. ECON. & STAT. 312 (1957).
(135.) Herbert Hovenkamp, Restraints on Innovation, 27 CARDOZO L.
REV. 248, 253 (2007); see also Joseph F. Brodley, The Economic Goals of
Antitrust: Efficiency, Consumer We!fare, and Technological Progress, 62
N.Y.U.L. REV. l020, l026 (1987) (characterizing innovation as “the
single most important factor in the growth of real output in … the
(136.) See JOSEPH A. SCHUMPETER, CAPITALISM, SOCIALISM, AND
DEMOCRACY 63-120 (3d ed. 1942); Brodley, supra note 135 (arguing that
dynamic efficiency matters more than static efficiency); Solow, supra
(137.) Indeed, some commentators have taken the view that more
exclusion of competitors by incumbents, rather than less, would promote
innovation. E.g., Keith N. Hylton & Haizhen Lin, Optimal Antitrust
Enforcement, Dynamic Competition, and Changing Economic Conditions, 77
ANTlTITRUST L.J. 247 (2010). This conclusion rests on two premises.
First, the freedom to exclude confers a larger ex ante incentive on the
incumbent, compared to ordinary monopoly profits, and thus promotes
greater innovation by the future incumbent. Second, outsized incumbents
are the best innovators, because they have the large scale needed for
certain research and the capital to reinvest in research and
development. PETER DRUCKER, THE CONCEPT OF THE CORPORATION 223-26 (1946)
; SCHUMPETER, supra note 136, at 81-106.
These premises have been challenged on multiple grounds. Kenneth
Arrow showed that highly profitable incumbents often have little
incentive to innovate because innovation cannibalizes an existing
business. Kenneth Arrow, Economic Welfare and the Allocation of
Resources for Invention, in THE RATE AND DIRECTION OF ECONOMIC
ACTIVITIES: ECONOMIC AND SOCIAL FACTORS 609 (Richard Nelson ed., 1962).
As an empirical matter, dramatic innovations in the twentieth century
have tended to come from outsiders, not incumbent firms. TIM Wu, THE
MASTER SWITCH : THE RISE AND FALL OF INFORMATION EMPIRES (2010) ; see
also Jonathan B. Baker, Beyond Schumpeter vs. Arrow: How Antitrust
Fosters Innovation, 74 ANTITRUST L.J. 575, 583-88 (2007) (surveying the
empirical literature). Meanwhile, dominant firms have frequently slowed
innovation by obstructing the market entry of innovative outsiders.
BOHANNAN & HOVENKAMP, supra note 30, at 245-50 (2011). Where
self-entrenchment excludes an innovator, the tradeoff is particularly
stark: the permission to exclude is likely to have only a modest
incremental positive effect on the ex ante incentives of the incumbent,
but a powerful negative effect on the innovative entrant. Id. at 246.
(138.) Verizon Commc’ns Inc. v. Law Offices of Curtis V.
Trinko, L.L.P., 540 U.S. 398, 408 (2004). To be precise, Trinko said
that “collusion,” not just price-fixing, was the supreme evil
of antitrust. But the reference has been understood narrowly. E.g., D.
Daniel Sokol, Cartels, Corporate Compliance, and What Practitioners
Really Think About Enforcement, 78 ANTITRUST L.J. 201, 228 n.119 (2012);
Thomas O. Barnett, Assistant Attorney Gen., Dep’t of Justice,
Address at the Georgetown Law Global Antitrust Enforcement Symposium:
Global Antitrust Enforcement 1 (Sept. 26, 2007),
(139.) See SCHUMPETER, supra note 136, at 63-120.
(140.) See, e.g., Marvin B. Lieberman & Douglas R. Johnson,
Comparative Productivity of Japanese and U.S. Steel Producers,
1958-1993, 11 JAPAN &WORLD ECON. 1, 2-3 (1999) (summarizing the
reasons for the ascendance of the Japanese steel industry).
(141.) This point has been noted in the particular context of
boycotts. See 13 HERBERT HOVENKAMP, ANTITRUST LAW [paragraph] 2202b, at
258, [paragraph] 2220b3, at 340 (2d ed. 2005).
(142.) For analyses making these points, see POSNER, supra note 8,
at 14; Kaplow, supra note 132, at 346, 356-59 & n.35, 369, 414, 446;
and N. Gregory Mankiw & Michael D. Whinston, Free Entry and Social
Inefficiency, 17 RAND J. ECON. 48 (1986), which argues that exclusion
may be socially efficient in homogeneous product markets if entry has a
primarily share-stealing rather than market-expanding effect.
(143.) Whether such imitation violates intellectual property law is
a separate question, outside the scope of this Article. For a taste of
this debate, compare Apple Inc. v. Samsung Electronics Co., 11-CV-01846,
2012 WE 4078433 (N.D. Cal. Aug. 24, 2012), in which the court awarded
Apple more than $1 billion for infringement of patents and trade dress,
with Apple, Inc. v. Motorola, Inc., 1:11-CV-08540, 2012 WL 2376664 (N.D.
Ill. June 22, 2012) (Posner, J., sitting by designation), in which the
court dismissed litigation regarding patent infringement between Apple
and Motorola Mobility with prejudice.
(144.) For perspectives, see C. Scott Hemphill & Jeannie Suk,
The Law, Culture, and Economics of Fashion, 61 STAN. L. REV. 1147, 1175
(2009); and Kal Raustiala & Christopher Sprigman, The Piraw Paradox:
Innovation and Intellectual Property in Fashion Design, 92 VA. L. KEY.
(145.) Cf. DOUGLAS G. BAIRD, ROBERT H. GERTNER & RANDAL C.
PICKER, GAME THEORY AND THE Law 178 (1994) (noting that firms might not
recognize that their activities support an anticompetitive equilibrium
in the context of tacit collusion).
(146.) For historical accounts, see Paul A. David, Clio and the
Economics of OWERTY, 75 AM. ECON. REV. 332 (1985); and W.E. Herfel,
Positive Feedback and Praxiology: Path Dependence in Action, in
PRAXIOLOGY AND THE PHILOSOPHY OF TECHNOLOGY 55, 58-59 (Wojciech W.
Gasparski & Timo Airaksinen eds., 2008).
(147.) For more on the role of standards in creating
platforms-ecosystems, in the jargon-see Tim Wu, Taking Innovation
Serious(v: Antitrust Enforcement if Innovation Mattered Most, 78
ANTITRUST L.J. 313 (2012).
(148.) Kellogg Co., 99 F.T.C. 8 (1982).
(149.) Id. at 11. In 1969, Kellogg led with a 45% share, followed
by General Mills (21%), General Foods (16%), and Quaker (9%). Id.
(150.) Id. at 12-13, 32-35, 160-90.
(151.) Id. at 65.
(152.) Id. at 37-38, 172-73.
(153.) Id. at 256.
(154.) Standard Stations, 337 U.S, 293 (1949).
(155.) Id. at 314. The restraints were condemned as a violation of
section 3 of the Clayton Act. The Court did not reach the question of
whether section 1 of the Sherman Act was violated, Id.
(156.) Frank H. Easterbrook, The Limits of Antitrust, 63 TEX. L.
REV. 1, 23 (1984).
(157.) Standard Stations, 337 U.S. at 309 n.12 (noting that the top
seven firms “distributed… through 26,439 of approximately 35,000
independent service stations in the Western area”).
(158.) Id.; see also id. at 295 (“It is undisputed that
Standard’s major competitors employ similar exclusive dealing
arrangements.”); id. at 302 (emphasizing the difference from
earlier cases, in that Standard was not a dominant firm).
(159.) Id. at 309 (emphasis added). Later cases have identified the
industry-wide nature of the practice as a key to the result. See infra
(160.) See, e.g., POSNER, supra note 8, at 229,264.
(161.) Standard Stations, 337 U.S. at 310-11. The Court noted the
absence of demonstrated effect but determined that, for purposes of
section 3 of the Clayton Act, there was no need to prove an
“actual diminish[ment]” of competition. Id. at 311.
(162.) Id. at 306-07 (identifying as benefits, inter alia, improved
planning, less price fluctuation, and avoided transaction costs).
(163.) Benjamin Klein, Exclusive Dealing as Competition for
Distribution “On the Merits,” 12 GEO. MASON L. REV. 119,138
& n.60 (2003).
(164.) Benjamin Klein, The Economics of Franchise Contracts, 2 J.
CORP. FIN. 9 (1995).
(165.) Indeed, in some models, such entry occurs in equilibrium.
See Philippe Aghion & Patrick Bolton, Contracts as a Barrier to
Entry, 77 AM. ECON. REV. 388,388 (1987).
(166.) See Editorial, The Not-Google Phone, N.Y. TIMES, Nov. 7,
2007, at A28, http://www.nytimes.com/20 07/u/07/opinion/07wed4.html.
(167.) WU, supra note 137; Tim Wu, Wireless Carterfone, 1
INT’L J. COMM. 389, 390, 404, 406 (2007).
(168.) See Amol Sharma, T-Mobile Wagers Deal with Google Is Worth
the Risk, Wall St. J., Nov. 12, 2007, at Bx,
(169.) See Laura M. Holson & Miguel Helft, T-Mobile To Offer
First Phone with Google Software, N.Y. TIMES, Aug. 14, 2008, at Ca,
(170.) See Iacobucci & Winter, supra note 24, at 221
(discussing the incentive to free ride on the exclusionary efforts of
(171.) MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION: PUBLIC GOODS
AND THE THEORY OF GROUPS 14-16 (1965).
(172.) This account simplifies the actual state of affairs. It is a
familiar result from game theory that a “volunteer’s
dilemma” is a true prisoner’s dilemma only in the limit. Where
the decision of the volunteer (here, the excluder) is pivotal to the
achievement of the collective good, it is no longer a dominant strategy
to defect. One special case in which the prisoner’s dilemma will be
absent is where cooperation from all of the excluders is necessary to
achieve exclusion. In that case, the game is a coordination game even in
a one-period setting. Thus, the discussion in the text potentially
overstates the difficulty of achieving a cooperative (i.e.,
(173.) See BREAN SKYRMS, THE STAG HUNT AND EVOLUTION OF SOCIAL
STRUCTURE 6 (2004) (providing an example where the prisoner’s
dilemma, when repeated, has the form of a “stag bunt”
(174.) See Stigler, supra note 12, at 45-47 (noting, as central
challenges, identifying terms and detecting secret deviations).
(175.) See Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp.
(Brooke Group), 509 U.S. 209, 227 (1993) (noting the difficulty of
allocating losses and gains in oligopolistic predatory pricing).
(176.) See 13 HOVENKAMP, supra note 141, [paragraph] 2202C, at 264
(noting the advantage of visibility in boycotts) ; POSNER, supra note 8,
at 244 (“But the improbability is less when the cartelists do not
have to agree on any price moves but have merely to agree on, say, not
dealing with retailers who buy from new entrants into the
(177.) Brooke Group, 509 U.S. at 228 (“This anticompetitive
minuet is most difficult to compose and to perform, even for a
(178.) Rivals might find it in their interest to commit to a
permanent price reduction if another firm defects, in order to
discourage the cut in the first place, but this is difficult to
accomplish. For a discussion of success factors in punishment, see
Christopher Leslie, Trust, Distrust, and Antitrust, 82 TEX. L. REV. 515,
616-2.1 (2004). For a formal model of punishment, see Edward J. Green
& Robert H. Porter, Noncooperative Collusion Under Imperfect Price
Information, 52 ECONOMETRIEA 87 (1984).
(179.) Aspen Skiing Co. v. Aspen Highlands Siding Corp., 472 U.S.
585 (1985) (emphasizing the termination of a previous course of dealing
as a basis for liability); see also Verizon Commc’ns Inc. v. Law
Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 409 (2004) (emphasizing
this aspect of Aspen Skiing).
(180.) Brief of United States at 19, United States v. Visa U.S.A.,
Inc., 344 F.3d 229 (2d Cir. 2003) (Nos. 02-6074, 02-6076, 02-6078), 2002
WE 32819130, at *18 (quoting the record).
(181.) Id. An important alternative explanation for
MasterCard’s adoption of similar rules is the fact that the two
firms have a substantial overlap in ownership-both are, essentially,
owned by the major banks. That may have given MasterCard less interest
in profiting at Visa’s expense.
(182.) Baker, supra note 67, at 162-69.
(183.) See Wu, supra note 147, 401-08 (describing the bans on
features extant in 2007).
(184.) See Brad Stone, AT&T: Tethering and MMS Coming to the
iPhone, N.Y. TIMES: BITS (June 8, 2009, 4:54 PM),
(185.) Such an offer resembles “price freeze” proposals
to combat oligopolistic price coordination and predatory pricing. See
Aaron S. Edlin, Stopping Above-Cost Predatory Pricing, 111 YALE L.J. 941
(2002); Guy Sagi, The Oligopolistic Pricing Problem: A Suggested Price
Freeze Remedy, 2008 COLUM. BUS. L. REV. 269.
(186.) On the other hand, there may be circumstances where
oligopoly is stronger than monopoly in resisting collapse. For example,
the ability to coordinate prices might be supportable with two firms,
but not more than two. See Iacobucci & Winter, supra note 22
(manuscript at 26) (noting, as an argument not formally modeled by the
authors, that since cartel stability decreases with cartel size, a
duopoly might be more aggressive than a monopoly in excluding entry). In
that case, a monopoly might find it profitable to accommodate, yet
members of a duopoly prefer to exclude. Or a single firm might find it
feasible to co-opt and incorporate the technology of a new entrant,
without fear that the technology will spread to rivals. By contrast,
members of an oligopoly recognize that if one firm goes down that path,
permitting entry, there will be a series of rapid competitive responses.
A related approach-though one that arguably stacks the deck in favor of
oligopoly-is to compare oligopoly exclusion to the same conduct by a
single firm, but one with a smaller share. See, e.g., Leslie, supra note
22, at 2262; Iacobucci &Winter, supra note 22 (manuscript at 16-23).
(187.) E.g., William H. Page, A Neo-Chicago Approach to Concerted
Action, 78 ANTITRUST L.J. 173, 184-93 (2012) (advocating such an
(188.) Christopher Leslie has made a similar point in the context
of tying-that this kind of conspiracy requires fewer meetings than a
price-fixing conspiracy does. Leslie, supra note 22, at 2269-70.
(189.) For a suggestion along these lines, see Kaplow, supra note
66, at 762.
(190.) BAIRD, GERTNER & PICKER, supra note 145, at 172-73
(describing multiple equilibria and the problem of equilibrium
(191.) Seeks To Reopen Tobacco Decree, supra note 120.
(192.) FTC v. P. Lorillard Co., 283 F. 999 (S.D.N.Y. 1922),
aff’d, FTC v. Am. Tobacco Co., 264 U.S. 998 (1924).
(193.) Am. Tobacco Co. v. United States, 328 U.S. 781 (1946),
aff’g 147 F.2d 93 (6th Cir. 1944).
(194.) Id. at 793.
(196.) See Federal Communications Act of 1934, Pub. L. No. 73-416,
48 Stat. l064 (codified as amended in scattered sections of 47 U.S.C.
(2006)); Willis-Graham Act of 1921, Pub. L. No. 67-15, 42 Stat. 27
(197.) See Wu, supra note 137, at 101-02.
(198.) Hush-A-Phone Corp. v. United States, 238 F.2d 266 (D.C. Cir.
0956); Hush-A-Phone Corp., 20 F.C.C. 391 (1955).
(199.) See Paul W. MacAvoy & Kenneth Robinson, Winning by
Losing: The AT&T Settlement and Its Impact on Telecommunications, 1
YALE J. ON REG. 1, 11 (1983) (“For many years, long-distance
service was left in the hands of regulated monopolies.”).
(200.) See id. at 9-14.
(201.) See Wu, supra note 137, at 191-93.
(202.) United States v. AT&T Co., 552 F. Supp. 131, 226-27
(D.D.C. 1982) (ordering the dissolution of AT&T), arid mere. sub
nora. Maryland v. United States, 460 U.S. 1001, 1001 (1983).
(203.) Vikas Bajaj, BellSouth and AT&T Close Deal, N.Y. TIMES,
Dec. 30, 2006, at C1, http
(204.) Wu, supra note 137, at 243-48.
(206.) See supra notes 87-89 and accompanying text.
(207.) See, for example, the “Edison Trust,” which was
dissolved in United States v. Motion Picture Patents Co., 225 F. 800,802
(E.D. Pa. 1915), and is described in Wu, supra note 137, at 63-73.
(208.) United States v. Paramount Pictures, Inc., 334 U.S. 131
(1948). See generally MICHAEL CONANT, ANTITRUST IN THE MOTION PICTURE
INDUSTRY 84-153 (1960) (reviewing the history and background of the
(209.) Compare Theatre Enters., Inc. v. Paramount Film Distrib.
Corp., 346 U.S. 537 (1954) (upholding the jury’s acquittal), with
Basle Theatres, Inc. v. Warner Bros. Pictures Dist. Corp., 268 F. Supp.
553 (W.D. Pa. 1958) (holding, after a bench trial, that the defendant
distributors had violated antitrust law).
(210.) OLSON, supra note 171, at 22-36.
(211.) Id. at 33-34.
(212.) See Levenstein & Suslow, supra note 21, at 44
(“There are in fact many successful cartels in quite unconcentrated
industries, but they almost always rely on industry
associations.”); see also Leslie, supra note 178, at 537-46
(describing various means to build trust among cartel members).
(213.) See C. Scott Hemphill & Jeannie Suk, The Fashion
Originators’ Guild of America: Self-Help at the Edge of IP and
Antitrust, in INTELLECTUAL PROPERTY AT THE EDGE: THE CONTESTED CONTOURS
OF IP (Rochelle C. Dreyfuss & Jane C. Ginsburg eds., forthcoming
2013); Sara Marcketti & Jean L. Parsons, Design Piracy and
Self-Regulation: The Fashion Originators’ Guild of America,
1932-1941, 24 CLOTHING & TEXTILES RES. J. 214 (2006).
(214.) Fashion Originators’ Guild of Am., Inc. v. FTC, 312
U.S. 457, 465-68 (1941).
(215.) Fashion Designers Seek Protection, N.Y. TIMES, June 8, 1941,
(216.) Fashion Originators’ Guild, 312 U.S. at 462.
(217.) See id. at 461.
(218.) Telecommunications Act of 1996, Pub. L. No. l04-104, 110
Stat. 56 (codified as amended in scattered sections of 47 U.S.C.).
(219.) See, e.g., Law Offices of Curtis V. Trinko, L.L.P.v. Bell
Atl. Corp., 305 F.3d 89, l09 (2d Cir. 2002), rev’d sub nora.
Verizon Commc’ns Inc. v. Law Offices of Curtis v. Trinko, L.L.P.,
540 U.S. 398 (2004); Covad Commc’ns Co. v. BellSouth Corp., 299
F.3d 1272, 1277-78 (11th Cir. 2002), vacated, 540 U.S. 1147 (2004);
Goldwasser v. Ameritech Corp., 222 F.3d 390, 394-95 (7th Cir. 2000)
(listing twenty practices alleged to be exclusionary).
(220.) See ASS’N FOR LOCAL TELECOMM. SERV., ANNUAL REPORT: THE
STATE OF LOCAL COMPETITION 2002, at 23 (2002),
(221.) James B. Speta, Antitrust and Local Competition Under the
Telecommunications Act, 71 ANTITRUST L.J. 99, l05-06 (2003) (summarizing
complaints about enforcement of the 1996 Act by the FCC).
(222.) The statement takes as true the Bells’ assertion that
the 1996 Act compelled each Bell to resell service to entrants at a
price lower than the Bell otherwise would have chosen. See also C. Scott
Hemphill, Network Neutrality and the False Promise of Zero-Price
Regulation, 25 YALE J. ON REG. 135, 154-59 (2008) (discussing conditions
underpinning the unilateral incentive to exclude).
(223.) Bell Atl. Corp. v. Twombly, 550 U.S. 544, 566-67 (2007).
(225.) Id. at 566 (internal quotation marks and citation omitted).
(226.) See, e.g., In re Wireless Tel. Servs. Antitrust Litig., 385
F. Supp. 2d 403, 406-07 (S.D.N.Y. 2.005); In re Visa Check/Mastermoncy
Antitrust Litig., No. 96-CV-5238, 2003 WL 1712568, at *3-4 (E.D.N.Y.
Apr. 1, 2003).
(227.) 15 U.S.C. [section] 2 (2006).
(228.) See, e.g., 1 aBa SECTION OF ANTITRUST LAW, ANTITRUST LAW
DEVELOPMENTS 328-29 (7th ed. 2012); 3B AREEDA & HOVENKAMP, supra
note 67, 810, at 467-81 (3d ed. 2008).
(229.) See supra Section I.C, Subsection III.A.2.
(230.) Easterbrook, supra note 156, at 30; see id. at 18, 30-32
(advocating the use of this filter, which “screens out almost all
challenges to vertical practices”).
(231.) See, e.g., United States v. Grinnell Corp., 384 U.S. 563,
570-71 (1966); United States v. Microsoft Corp., 253 F.3d 34, 51 (D.C.
Cir. 2000) (en banc) (per curiam).
(232.) Here, the presence of a large number of incumbents may
suggest that entry can be accomplished at a relatively low cost, and
hence that effective exclusion is unlikely.
(233.) See Brief of Mastercard International Inc. and Visa U.S.A.
Inc. as Amici Curiae in Support of Petitioners at 1-2, Bell Atl. Corp.
v. Twombly, 550 U.S. 544 (2007) (No. 05-1126), 2006 WL 474077, at
“1-2 (arguing that the payment networks are frequent targets of
“conspiracy” claims, which “often support the critical
element of conspiracy with nothing more than allegations that the two
networks, or individual banks associated with them, acted in similar
ways, even when such conduct on its face makes perfect sense as a matter
of each individual actor’s economic self-interest, given the
structure of the payment-card industry”).
(234.) Turner, Scope, supra note 1, at 1230. As a doctrinal matter,
Turner favored liability under section 2 as a form of attempted
(235.) 3B AREEDA & HOVENKAMP, supra note 67, 810d, at 473 (3d
(236.) E.g., Standard Oil Co. of N.J.v. United States, 221 U.S. t,
(237.) Article l02 of the Treaty on the Functioning of the European
Union prohibits “[a]ny abuse by one or more undertakings of a
dominant position within the internal market or in a substantial part of
it.” Consolidated Treaty on the Functioning of the European Union
art. 102, May 9, 2008, 20080.J. (C 125) 89 (emphasis added). The
reference to multiple entities leaves an opening for a shared monopoly
claim. However, it appears to be an open question whether the provision
extends so far, although at least one case has suggested it does in
supportive dicta. See Joined Cases C-395/96 P&C-396/96 P, Compagnie
Maritime Belge Transps. SAv. Comm’n, 2000 E.C.R. 1-1442
(“[T]he existence of an agreement or of other links in law is not
indispensable to a finding of a collective dominant position; such a
finding may be based on other connecting factors and would depend on an
economic assessment and, in particular, on an assessment of the
structure of the market in question.”); see also Hawk & Motta,
supra note 13, at 87 (reviewing precedent and concluding that the lack
of explicit analysis under EU law “precludes a definitive
answer” in the case of mere interdependence).
(238.) See, e.g., Rebel Oil Co. v. Ad. Richfield Co., 5] F.3d 1421,
1443 (9th Cir. 1995) (“To pose a threat of monopolization, one firm
alone must have the power to control market output and exclude
competition …. We recognize that a gap in the Sherman Act allows
oligopolies to slip past its prohibitions, but filling that gap is the
concern of Congress, not the judiciary.” challenge oligopolies
engaged in parallel but noncollusive conduct.”); 3B AREEDA
HOVENKAMP, supra note 67, [paragraph] 810g, at 480 & n.35 (3d ed.
2008) (collecting cases and concluding that courts have rejected
“shared monopoly” as a viable section 2 theory).
(239.) In particular, the existence of liability for
“conspiracy to monopolize” among multiple excluders may have
been taken, in a sort of exclusio reasoning, to eliminate section 2
liability where the excluders have not conspired, or cannot be
convincingly shown to have conspired.
(240.) JTC Petrol. Co. v. Piasa Motor Fuels, Inc., 190 F.3d 775,
780 (7th Cir. 1999) (Posner, J.) (declining to recognize a shared
monopoly theory, but concluding that where “oligopolistic
interdependence” could be shown, plaintiff could establish “a
combination or a (tacit) conspiracy”). Section 2 liability for
parallel exclusion is apparently sufficiently disfavored that sometimes
it is overlooked entirely. The original panel opinion in JTC Petroleum
missed the section 2 issue. Compare 179 F.3d l073 (7th Cir. 1999)
(noting the withdrawal of the original opinion, which had decided the
case without mentioning section 2 or shared monopoly), with 190 F.3d 775
(revised opinion, considering section 2 claims but rejecting a shared
(241.) See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 553-54 (2007).
But see Kaplow, supra note 66, at 731-43 (arguing, based on pre-Twombly
precedent and the language of Twombly itself, that one could conclude
that the agreement requirement reaches all interdependent conduct).
(242.) See supra notes 72-75 and accompanying text.
(243.) Twombly, 550 U.S. at 551, 567-69.
(244.) Id. at 554; see also id. at 569 (concluding that
“antitrust conspiracy was not suggested” by incumbents’
unwillingness to enter each others’ markets).
(245.) Id. at 550-51,566-67.
(246.) Similarly, we would read narrowly certain dicta issued by
the Court in an earlier case about parallel action. In Brooke Group, 509
U.S. 209 (1993), the Court cast doubt on mere interdependence as a basis
for horizontal concert:
Tacit collusion, sometimes called oligopolistic price coordination or conscious parallelism, describes the process, not in itself unlawful, by which firms in a concentrated market might in effect share monopoly power, setting their prices at a profit-maximizing, supracompetitive level by recognizing their shared economic interests and their interdependence with respect to price and output decisions.
Id. at 227 (emphasis added). There, the Court appears to have been
discussing parallel pricing, or, at most, parallel exclusion instituted
through oligopolistic predatory pricing. The discussion did not consider
parallel exclusion as a category that raises distinctive concerns.
(247.) For a discussion of one such case, see supra note 76.
(248.) See POSNER, supra note 8, at 79, 93 (identifying
exclusionary practices by multiple firms as evidence of actionable
collusion); Kovacic et al., supra note 23, at 425 (discussing
“dominant-firm conduct by cartels” as a “plus”
factor); see also Heeb et al., supra note 23, at 227 (concluding that
“monopolization conduct by non-dominant firms” may indicate
(249.) See, e.g., William E. Kovacic, The Identification and Proof
of Horizontal Agreements Under the Antitrust Laws, 38 ANTITRUST BULL. 5,
44 & nn.113-14 (1993) (collecting cases).
(250.) Verizon Commc’ns Inc. v. Law Offices of Curtis V.
Trinko, L.L.P., 540 U.S. 398,414 (2004).
(251.) Federal Trade Commission Act, Pub. L. No. 63-203, [section]
5(a)(1), 38 Stat. 717, 719-21 (1914) (codified as amended at 15 U.S.C.
[section] 45(a)(1) (2006)).
(252.) Turner, Definition, supra note 1, at 682.
(253.) 15 U.S.C. [section] 16(a) (2006); see also C. Scott Hemphill
& Mark A. Lemley, Earning Exclusivity: Generic Drug Incentives and
the Hatch-Waxman Act, 77 ANTITRUST L.J. 947, 972-75 (2011) (advocating
broader liability, under section 5 in light of its lesser consequences).
(254.) See, e.g., FTC v. Ind. Fed’n of Dentists, 476 U.S. 447,
454 (1986) (holding that section 5 covers “not only practices that
violate the Sherman Act and the other antitrust laws, but also practices
that the Commission determines are against public policy for other
reasons” (citations omitted)); FTC v. Brown Shoe Co., 384 U.S.
316,321 (1966) (holding that section 5 reaches “practices which
conflict with the basic policies” underlying antitrust law, as well
as incipient violations of antitrust law); see also FTC v. Sperry &
Hutchinson Co., 405 U.S. 233, 244 (1972) (noting that the FTC must
“consider public values beyond simply those enshrined in the
letter or encompassed in the spirit of the antitrust laws”).
(255.) For evaluations of the feasibility and desirability of FTC
rulemaking authority, see Baker, supra note 67, at 207-19; and C. Scott
Hemphill, An Aggregate Approach w Antitrust: Using New Data and
Rulemaking To Preserve Drug Competition, l09 COLUM. L. REV. 629, 673-82
(256.) E.g., McDonnell Douglas Corp, 92 F.T.C. 976 (1978); Boeing
Co., 92 F.T.C. 972 (1978); Lockheed, 92 F.T.C. 968 (1978).
(257.) E.g., Amerco, l09 F.T.C. 135 (1987).
(258.) E.g., U.S. DEP’T OF JUSTICE & FED. TRADE
COMM’N, ANTITRUST GUIDELINES FOR THE LICENSING OF INTELLECTUAL
PROPERTY [section] 6, at 32 (1995),
(259.) E.g., Negotiated Data Solutions LLC, No. 051-0094, 2008 VVL
258308 (Fed. Trade Comm’n Jan. 22, 2008); Rambus, hlc., No. 9302,
2006 WL 2330118 (Fed. Trade Comm’n Aug. 2, 2006) (Leibowitz,
Comm’r, concurring); Union Oil Co. of Cal., No. 9305, 2005 WL
1541537 (Fed. Trade Comm’n June 10, 200); Dell Computer Corp., 121
F.T.C. 616 (1996).
(260.) See McDonnell Douglas, 92 F.T.C. 976; Boeing, 92 F.T.C. 972
Lockheed, 92 F.T.C. 968.
(261.) See E.I. du Pont de Nemours & Co. v. FTC, 729 F.2d 128
(2d Cir. 1984).
(262.) For example, in an exclusive dealing case, the relevant
contract is between the manufacturer and the distributor. In a tying
case, agreement may be established by the contract between the seller
and the purchaser. For an explanation and critique of this approach to
tying, see Christopher R. Leslie, Unilaterally Imposed Tying
Arrangements and Antitrust’s Concerted Action Requirement, 60 OHIO
ST. L.J. 1773, 1783 (1999).
(263.) The limitation does not apply to predatory pricing by
oligopolists, which can be pursued without finding any agreement under
the Robinson-Patman Act. See Brooke Group, 509 U.S. 209 (1993).
(264.) E.g., Daniels Sharpsmart, Inc. v. Tyco Int’l, No.
5:05-CV-169, 2006 U.S. Dist. LEXIS 100158 (E.D. Tex. Oct. 18, 2006);
Genico, Inc. v. Ethicon, Inc., No. 5:04-CV-229, 2006 U.S. Dist. LEXIS
96909 (E.D. Tex. Mar. 23, 2006).
(265.) Daniels Sharpsmart, 2006 U.S. Dist. LEXIS 100158; Genico,
2006 U.S. Dist. LEXIS 96909.
(266.) E.g., Genico, 2006 U.S. Dist. LEXIS 96909 (denying motion to
dismiss). See generally Elhauge, supra note 133 (examining antitrust
treatment of parallel exclusion of device makers). For a critique, see
Frank M. Hinman & Brian C. Rocca, The “Aggregation
Theory”: A Recent Series of Decisions in Bundled Discounting Cases
Threatens To Expand Section One into Uncharted Territory, ANTITRUST
SOURCE, Feb. 2007, at 1.
(267.) See, e.g., 9 AREEDA & HOVENKAMP, supra note 67,
[paragraph] 1709a, at 89 (3d ed. 2011) (“[T]he relevant foreclosure
aggregates those of the defendant and of its rivals.”); 11 AREEDA
& HOVENKAMP, supra note 67, [paragraph] 1821c, at 191 (3d ed. 2011)
(“When exclusive dealing is used to facilitate collusion, the
percentage foreclosure by any single firm might be less, but then the
relevant issue becomes the aggregate foreclosure imposed by the upstream
firms in the collusive group.”) ; ELHAUGE, supra note 22, at 343-46
(reviewing doctrine and policy under a rubric of “cumulative
foreclosure”); Elhauge, GPO, supra note 22, at 3 (“[I]t is the
cumulative effect of all those exclusionary agreements that determines
the marketwide foreclosure.”).
(268.) 337 U.S. 293 (1949).
(269.) Id. at 309.
(270.) See, e.g., POSNER, supra note 8, at 229, 264. Indeed,
critics of the opinion often ignore the collective nature of the
conduct. See supra note 156 and accompanying text.
(271.) E.g., Tampa Elec. Co. v. Nashville Coal Co., 365 U.S.
320,334 (1961) (noting the lack in that case of “myriad outlets
with substantial sales volume, coupled with an industry-wide practice of
exclusive contracts”); see also United States v. Phila.
Nat’l Bank, 374 U.S. 321, 365-66 (1963) (reciting information on
the collective market share and collective control of distribution in
(272.) FTC v. Motion Picture Advcr. Serv. Co., 344 U.S. 392 (1953).
In Motion Picture Advertising, four film distributors had agreements
with theater operators, making each distributor the exclusive provider
of advertisements accompanying films. Together, about seventy-five
percent of the operators in the United States were subject to the
agreements. As in Standard Stations, the Court again aggregated shares
and concluded that aggregation was appropriate.
Neither case squarely holds that aggregation is appropriate in a
Sherman Act case. Standard Stations was brought under the Clayton Act
and Sherman Act, but the Court did not reach the Sherman Act claim, and
indeed emphasized the Clayton Act setting as a reason not to insist on a
showing of anticompetitive effect. Motion Picture Advertising was
brought under the FTC Act, and the Court found liability as an
interpretation of both the Sherman Act and the FTC Act. See also Phila.
Nat’l Bank, 374 U.S. at 366 (stating that Motion Picture
Advertising is a holding under both the Sherman Act and the FTC Act). In
dicta, Judge Easterbrook has rejected the proposition that Motion
Picture Advertising contains a Sherman Act holding as a “bald and
unreasoned assertion” by the Supreme Court. Paddock Publ’ns,
Inc. v. Chi. Tribune Co., 103 F.3d 42, 46 (7th Cir. 1996). As discussed
supra, aggregation has been applied in Sherman Act cases by lower
(273.) See, e.g., In re Wireless Tel. Servs. Antitrust Litig., 385
F. Supp. 2d 403, 426 (S.D.N.Y. 2005) (dismissing allegation that
wireless telecommunications carriers tied wireless service and handsets,
where no individual carrier had sufficient market power to trigger the
modified per se rule applicable to tying, and no conspiracy among the
carriers was alleged). A fortiori, we disagree with the series of
lower-court cases that fail to aggregate even where conspiracy was
alleged. For an analysis of these cases, see Leslie, supra note 22, at
(274.) 10 AREEDA & HOVENKAMP, supra note 67, [paragraph]
[paragraph] 1734b, 1734e (3d ed. 2011) (advocating that industry-wide
tying by oligopolists should be evaluated under the rule of reason).
(275.) See Declaration of Professor Harry First, In re Visa
Check/Mastermoney Antitrust Litig., 297 F. Supp. 2d 503 (E.D.N.Y. 2003)
(No. 96-CV-5238), 2003 WL 25656951.
(276.) In re Visa Check/Mastermoney Antitrust Litig., No.
96-CV-5238, 2003 WL 1712568, at *3-4 (E.D.N.Y. Apr. 1, 2003).
(277.) See U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N,
HORIZONTAL MERGER GUIDELINES [section] 7, at 24-27 (2010) [hereinafter
HORIZONTAL MERGER GUIDELINES].
(278.) Andrew Ross Sorkin, Michael J. de la Merced & Jenna
Wortham, AT&T Makes Deal To Buy T-Mobile for $39 Billion, N.Y.
TIMES, Mar. 21, 2011, at A1.
(279.) See HORIZONTAL MERGER GUIDELINES, supra note 277, [section]
7, at 24-27 (discussing “coordinated effects”).
(280.) Complaint, United States v. AT&T Inc., No.
1:11-cv-01560, 2011 WL 3823252 (D.D.C. Aug. 31, 2011); Staff Analysis
and Findings, FED. COMM. COMMISSION (2011),
(281.) Staff Analysis and Findings, supra note 280, at 43. The
report noted that this question was not “directly at issue” in
the Department of Justice challenge, bur was raised in several private
challenges to the transaction. Id. at 50.
(282.) Id. at 43 n.247. The other two major carriers, T-Mobile and
Sprint, were relatively more willing to offer roaming and wholesale
services. Id. FCC staff concluded that “[t]he elimination of
T-Mobile from the marketplace would reduce the number of potential
partners … which could hinder the development of innovative new
offerings.” Id. at 56.
(283.) Id. at 56-57.
(284.) Id. at 43 n.247; see also id. at 59 (noting the merger
“could make it more difficult for providers other than the newly
merged AT&T and Verizon Wireless to access as sufficient a range of
cutting-edge handsets in the future as would be available absent the
(285.) HORIZONTAL MERGER GUIDELINES, supra note 277, [section] 7,
at 24-27 (limiting discussion of coordinated effects to relaxation of
competition among the remaining firms).
(286.) Id. [section] 1, at 1, [section] 8, at 27.
(287.) United States v. Gen. Motors Corp., 384 U.S. 127 (1966).
(288.) Id. at 142, 145 (“Elimination, by joint collaborative
action, of discounters from access to the market is a per se violation
of the Act.”).
(289.) Id. at 146.
(290.) Id. at 133.
(291.) For critiques of General Motors, see, for example, Harry S.
Gerla, A Micro-Microeconomic Approach to Antitrust Law: Games Managers
Play, 86 MICH. L. REV. 892, 912 (1988), which emphasizes the protection
of the franchise system; Glazer, supra note 15, at 44-45, which rejects
per se treatment in light of the flee-rider problem created by
discounters; and Richard A. Posner, The Next Step in the Antitrust
Treatment of Restricted Distribution: Per Se Legality, 48 U. CH1. L.
REV. 6, 24-25 (1981), which emphasizes the anti-flee-riding
justification, while cautioning that liability might be appropriate if
the arrangement supported a dealer cartel.
(292.) See, e.g., Herbert Hovenkamp & Christopher R. Leslie,
The Firm as Cartel Manager, 64 VAND. L. REV. 813, 864 (2011) (collecting
and endorsing previous critiques of the “overly aggressive per se
rule [applied] to restraints that were ancillary to legitimate,
efficiency-enhancing joint ventures by firms that lacked significant
market power” in United States v. Topco Associates, Inc., 405 U.S.
596 (1972), and United States v. Sealy, Inc., 388 U.S. 350 (1967)).
(293.) In some instances, an observed horizontal agreement might
indicate the existence of a price-fixing cartel, or suggest an effect
that is hard to explain except as anticompetitive exclusion. For an
argument of the latter type, see Leslie, supra note 22, at 2289.
(294.) See, e.g., United States v. Aluminum Co. of Am., 148 F.2d
416, 430-31 (2d Cir. 1945) (Hand, J.) (finding a section 2 violation
where a monopolist aggressively expanded production in anticipation of
(295.) Verizon Commc’ns Inc. v. Law Offices of Curtis V.
Trinko, L.L.P., 540 U.S. 398, 407 (2004) (stating that a monopoly is not
a status offense) ; Atl. Richfield Co. v. USA Petrol. Co., 495 U.S. 328,
341 (1990) (“It is in the interest of competition to permit
dominant firms to engage in vigorous competition ….” (quoting
Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. l04, 116 (1986)));
Olympia Equip. Leasing Co. v. W. Union Tel. Co., 797 F.2d 370, 375 (7th
Cir. 1986) (Posner, J.) (“Today it is clear that a firm with lawful
monopoly power has no general duty to help its competitors ….”);
Foremost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534, 544 (9th
Cir. 1983) (“A monopolist, no less than any other competitor, is
permitted and indeed encouraged to compete aggressively on the merits
(296.) See, e.g., United States v. Microsoft Corp., 253 F.3d 34, 88
(D.C. Cir. 2001) (en banc) (per curiam) (“[B]undling by all
competitive firms implies strong net efficiencies.”).
(297.) For an example of tile ambiguity, see Beltone Elecs. Corp.,
l00 F.T.C. 68, 97 (1982), which observed that “[a]t one time,
exclusive dealing was arguably practiced by the major firms in [the
hearing aid] market, a fact suggesting either that the practice involved
efficiencies or that it was collusively adopted to block entry.”
AUTHORS. C. Scott Hemphill is Professor of Law at Columbia Law
School and formerly Chief of the Antitrust Bureau at the Office of the
New York State Attorney General; Tim Wu is Isidor and Seville Sulzbacher
Professor of Law at Columbia Law School. We thank Marvin Ammori, John
Asker, Jon Baker, Anu Bradford, Frank Easterbrook, Einer Elhauge, David
Engstrom, Nora Engstrom, Joe Farrell, Harry First, Victor Goldberg,
Laura Hemphill, Herbert Hovenkamp, Bert Huang, Kathryn Judge,
Christopher Leslie, Barak Orbach, Richard Posner, Danny Sokol, Lawrence
White, and audiences at Columbia, George Washington, NYU, the University
of Chicago, and the New York State Bar Association for helpful
discussions. Shane Avidan, Benjamin Chapin, Jesse Creed, Taylor Kirklin,
Janeth Lopez, Matthew Schmitten, and Caroline Ferris White provided
outstanding research assistance. The views expressed here are our own.
Table 1. EXAMPLES OF PARALLEL EXCLUSION ALLEGATIONS NINDUSTRY ALLEGED CONDUCT Breakfast cereals Product proliferation (34) Slotting fees paid to grocery stores (35) Can-closing Exclusive dealing contracts, volume discounts, equipment and tying of can-closing equipment and cans (36) Cemetery Tying cemetery plots and foundation preparation services services (independent seivicers) (37) Cigarettes Purchase of tobacco beyond actual needs (discount cigarette manufacturers) (38) Conduit for Campaign to control product approval process of electric xviring National Fire Protection Association (plastic conduit) (39) Film production Various agreements and practices by integrated and distribution studios (independent producers and theaters) (40) Medical devices Discouats conditioned on high market shares to group purchasing organizations and hospitals (41) Payment Exclusionary mile prohibiting bank issuance of networks competing general purpose credit cards (42) Tying credit cards and "signature" debit cards (PIN debit networks) (43) Petroleum Exclusive requirements contracts with service refining stations (44) Various conduct to deny entry to independents (45) Road contractors Inducements to asphalt producers to refuse to sell to competing road contractor (46) Soft drinks "Flavor I"estrictlon3", imposed on bottleis (competing soft drink makers) (47) Tabulating Tying machine eases and punch cards machines (target unclear) (48) "Telecom (local Refusal to deal (competitive local exchange wircline) carriers) (49) Telecom Tying wireless service and handsets (wireless) (unaffiliated handsets) (50) Refusal to accept Google Wallet mobile paytnent (competing payment offering) (51) Waste disposal Exclusive contracts with purchaser (52) services This table omits examples of exclusion conducted through open, explicit agreements or formal organizations, discussed supra notes 18-19 and accompanying text. A parenthetical indicates the target of exclusion, where the target is not clear from the context.