Antitrust news tends to feature international cartels or mergers, events that involve at least two companies. But, as the recent settlement of the Intel case at the Federal Trade Commission reminds us, a single firm acting alone can also violate the antitrust laws. Of course, this has been well known for a century, ever since the Supreme Court's early monopolization cases in 1911, Standard Oil and American Tobacco. More recently, we've seen the Justice Department's mega-proceeding against Microsoft and now the pending EU investigation of IBM. It has been said that antitrust is either about collusion or exclusion, and that single firm conduct, as Intel shows, involves exclusion. Of course, both result in higher prices and lower output.
Although the Intel case is based on Section 5 of the FTC Act, single firm cases generally have been brought under Section 2 of the Sherman Act, which prohibits monopolization and attempts to monopolize. A major problem with these cases has been to distinguish between conduct that is vigorously competitive as opposed to conduct that is exclusionary or predatory. As the District of Columbia Circuit Court said in Microsoft, "Whether any particular act of a monopolist is exclusionary, rather than merely a form of vigorous competition, can be difficult to discern." For example, if the prices are above cost in both situations, how are we to distinguish between allegedly predatory pricing and vigorous price competition?
Illustrating the difficulty, the Federal Trade Commission and the Department of Justice Antitrust Division commenced a series of hearings in June 2006 with the intention of issuing a joint report clarifying the standard for monopolization conduct. After a year of hearings, rather than a joint report, the Antitrust Division issued its own 181-page report on September 8, 2008 and, on the same day, three FTC Commissioners issued a joint dissent in which they stated that the "FTC does not endorse the Department's Report" and that it was "a blueprint for radically weakened enforcement of Section 2 of the Sherman Act." Subsequently, in the new Obama administration, the Justice Department withdrew its Section 2 report.
In the Intel case, the FTC alleged that Intel had a monopoly position in computer microchips and that it used and acted to maintain that monopoly in various ways by paying and coercing major computer makers to prevent them from using competitor's chips, primarily those from AMD. For example, Intel allegedly paid computer makers, through rebates and otherwise, not to sell computers containing competitive chips. The complaint alleges that Intel also acted to block competition from NVIDIA by causing it to spend time and resources developing "integrated chipsets" when Intel did not intend to allow these chipsets to interoperate with its microprocessors. The Order issued by the FTC on October 29, 2010, contains a range of provisions designed to cure the alleged violations.
There have been many Section 2 Sherman Act cases dealing with various kinds of single-firm conduct under the monopolization and attempt to monopolize standards of Section 2, including: predatory pricing, Brooke Group (1993); exclusive dealing arrangements, Microsoft (2001); refusal to deal with competitor's customers, Lorain Journal (1951); tying arrangements, Eastman Kodak (1992); bundled rebates, LePage's (2003); refusal to deal with rivals, Aspen Skiing (1985) and Trinko (2004); predatory product design, Microsoft (2001); failure to predisclose new product to competitors, Berkey Photo (1979); announcement of product before commercial availability, Covad Communications (2005); price squeezes, linkLine Communications (2009); failure to disclose intellectual property to standards setting organization, Rambus (2008); groundless litigation brought against a competitor, Professional Real Estate Investors (1993); use of fraud to obtain IP rights, Walker Process (1965); merger to monopoly, Grinnell (1966).
It is reasonable for antitrust compliance programs to focus primarily on price fixing and other horizontal agreements among competitors. But companies must also not forget that it is possible for single firms to violate the antitrust laws.
About Parker Poe's Antitrust & Business Torts Practice
Parker Poe provides a wide range of services relating to antitrust, trade regulation and business tort matters. The Antitrust & Business Torts Practice Group resolves disputes at the state, national and international levels through negotiation, alternative dispute resolution, litigation and the appeals process. Attorneys in our practice group have worked at federal and state antitrust enforcement agencies, held United States Supreme Court judicial clerkships and include former federal prosecutors.