RESTORING BALANCE IN THE TEST FOR EXCLUSIONARY CONDUCT

By Thomas N. Dahdouh¹

The Federal Trade Commission’s recent monopolization cases against Intel² and Google,³ two strikingly different recent decisions by Courts of Appeals — Novell v. Microsoft⁴ and ZF Meritor v. Eaton Corp.,⁵ and a recent article by Professor Herbert Hovenkamp⁶ all demonstrate the ongoing tumult in Sherman Act Section Two monopolization theory. Courts have struggled for some time now with the vague and circular test for Sherman Act Section Two cases, first enunciated in United States v. Grinnell Corp.⁷ Unfortunately, the line between exclusionary conduct and legitimate conduct cannot be delineated easily. Faced with the difficulty in assessing conduct in a fact-intensive and nuanced manner, some courts have sought "one-size-fits-all" tests that would allow a court to dismiss summarily meritless cases without engaging in fact-intensive investigation. Indeed, the Supreme Court’s decisions in Pacific Bell Telephone Co. v. linkLine Communications Inc.⁸ and Verizon Communications Inc. v. Law Offices of Curtis V. Trinko⁹ have certainly encouraged such efforts. The reality is that the near limitless variation of exclusionary conduct — and the serious potential that such conduct could seriously impair competition — makes any such effort to find a uniform test likely to lead to a seriously under-deterrent enforcement regime.

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Rather, the right enforcement approach must utilize a flexible balancing test. The District of Columbia Circuit Court, sitting en hanc in the Microsoft case, unanimously adopted the right overarching, rule-of-reason approach: a court must balance the anticompetitive effect of the exclusionary conduct against the procompetitive justification for the conduct.¹⁰ This article suggests a further addition to the overarching balancing test: namely, that the balancing test be adjusted depending on the type of exclusionary conduct at issue in the case. This article proposes that one would first (1) identify the type of conduct involved and slot it along a continuum from most suspect to least suspect; and then (2) adjust how demanding the "balancing test" is along the two key inquiries of the balancing test: (a) the level of evidence necessary to show that the asserted justification for the conduct is nonpretextual and cognizable (that is, procompetitive and efficiency-enhancing), and (b) the level of causal proof necessary to show that the conduct played a role in the creation or maintenance of the defendant’s monopoly power.