Competition and US Antitrust Law

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19/06/2015 INTRODUCTION The boundaries of a business conduct that can be defined as anticompetitive and exclusionary is still one of the most debated issues in the United States Antitrust Law (hereinafter ‘‘US Antirust Law’’) today. The business conducts that intends to decrease the competition in the relevent market is widely considered as violation under the Sherman Antirust Act dated 1890 (hereinafter ‘‘Sherman Act’’), which aims to prevent the trusts and monopolization. As mentioned above by way of protecting the competition, Sherman Act foresees some provisions where it prohibits the contracts, combinations or conspiracies that are to preclude competition and harm other competitiors. Therefore these forms shall be illegal under Sherman Act to the extent they limit the commerce(KUSSE, 1984).[1] Under the US Antitrust Case Law and also by many leading scholars, it is widely accepted that a company is free to refuse to deal with a competitor if this behavior is not an attempt to monopolize the market. This paper will mainly focus on this assumption in light of the present US Law. In particular, in general, the Colgate doctrine revelaed that a competitor has the right to refuse to deal with a rival and if a monopoly power firm is not intended to create monopolization, the Sherman Act does not restrict the monopolist to freely choose the person/rival to deal. [2] When considering the Colgate doctine as starting point, this essay will argue the well known Aspen Case, in order to examine to what extent monopolists have an affirmative duty to deal with a rival. The limits of this right were drawn later by other US Supreme Court decision by considering the essetial facilities doctrine. Aspen is one of these cases where the Supreme Court concluded that the competitors right to refuse to deal with a rival competitior is not unquantified however the Court did not adopted the essential facilities doctrine. Therefore this doctrine will not be the subject of this paper instead it will be referred slightly when necessary. The facts of the Aspen case will be analyzed below further however just to give an overview it is noteworthy to mention beforehand that the dispute arose between two ski resort companies namely; Aspen Skiin and Aspen Highlands, which for many years contributed to a joint marketing of a ticket to the skiers which gives access to eachothers mountains.[3] However Aspen Skiing discontinued its participation in this joint ticket program with Aspen Highlands. In Aspen Case, the Supreme Court concluded that since the defendant monopolist could not prove the justification to its refusal to cooperate to market a joint ski lift ticket that it formerly supplied to the Claimant was to obtain or at least was to cause monopoly violates Section 2 of the Sherman Act.[4]
  1. RELEVANT FACTS OF THE CASE
Aspen Case between two ski resort companies in Aspen, Colorado in the USA i.e. Aspen Highlands (hereinafter ‘‘Aspen Higlands’’) and Aspen Skiing Co. (hereinafter ‘‘Aspen Skiing’’) is a United States Supreme Court case dated 1985 which has significance effect with regard to the abuse of dominant position. By the time of the dispute was first brought to the US Federal District Court, tehere were four ski resorts in Aspen Mountain; only one of them was owned by Aspen Higland and the rest of the resorts were owned by a single resort namely Aspen Skiing. The Parties had, for several years, to be more specific-until 1978- contributed into a joint marketing plan to sell a ski ticket called a 4-area All Aspen ticket which allowed the skiers to visit all of the Mountains without considering at which resort they stay and the revenues from these sales were shared between the parties in accordance with the coupons collected everyday. However, in 1978, Aspen Skiing abused its dominant position by it will not continue to sell its visitors the all-Aspen ticket if Aspen Highlands would not accept a fixed share of revenue which will in long term will hamper rival competition and therefore not considered as ‘normal competition’.[5] After long negotiations, Highlands accepted a fixed percentage which is a bit higher than what was offered by Aspen Skiing, which was leter further decreased by Aspen Skiing. [6] Because this offer was unaccapteble for Aspen Highland and therefore had not been accepted by Aspen Highlands, Aspen Skiing discountinued to sell the all-Aspen tickets. Notwithstanding Aspen Skiing started to act in a way where it stoped to offer any lift tickets to Aspen Highlands’ visitors to enable them to ski at the the Aspen Skiing Mountains as well. This attitude economicly harmed Aspen Highlands since it prevent Aspen Highlands from offering skiers visiting its resort any ticket for giving acces to all mountains (multi- area ticket). In spite of this Aspen Skiing was able to offer a 3-area, 6-day ticket which made it the only resort in the market that can give oppourtunity to visit more than one mountain during their visit and therefore the visitor who wants to ski on different mountains had to visit the Aspen Skiing’s resort. In addition to that, to promote this ticket, Aspen Skiing started an advertising campaign that influenced people who were unfamiliar with Aspen where it changed its picture of the four mountains in the Airport- Aspen Airways waiting room. The new sign referred to its three mountains only.[7] These actions of Aspen Skiing harmed Aspen Highlands so deeply that it became very hard to survive in the market as a result of which Aspen Highlands became a day ski area. Consequently, Aspen Highlands' market share faced a steady downfall after it discountinued to sell the multiarea tickets.[8] Aspen Highlands' revenues from associated skiing facilities and services declined sharply as well. Eventually in 1979, Aspen Highlands filed a case before the United States District Court alleging that Aspen Skiing’s unilateral refusal to continue selling a joint ticket launced by the competitors was to attempt to monopolize the market under Sherman Act- Section 2. In 1985, the case was taken to the Supreme Court, wherein the Supreme Court concluded that Aspen Skiing’s refusal to deal with a rival competitor was exclusionary since it made a change in the longlasting joint marketing program between the parties on some basis other than efficiency which can be defined as predatory.[9] The Supreme Court more specifically reasoned its decision based on the fact that refusal to deal violates antirust law only when it is to maintain a monopoly power and Aspen Skiing without any justified reason cut a longlasting cooperation with its rival.[10] Prior to Aspen Case, almost al of the US Supreme Court case have evaluated the refusal to deal concept within the framework of essential facilities doctrine under which a monopolist is to deal with a competitior if a monopolist has the control of a facility essential for its rival to compete and it has denied the use of this facility to a rival without a valid business reason. Aspen Case is therefore important that it did not adopt the essential facilities doctrine, which was being critizied by many leading scholars.[11] The reason of the criticism was that most of the courts interpreted the essential facilities doctrine and concluded that it gives a general duty to deal with a rival. This was negated by the Aspen case where the court concluded that Aspen Skiing's refusal to deal with Aspen Highlands was exclusionary when considering the fact that Aspen Skiing could not be able to prove an efficiency justification for its refusal and further the Court did not evaluated whether or not the product (facility) was essential. In my opinion Aspen case has a great importance where the Supreme Court did not consider the essential facilities doctrine instead the justification for a monopolist resfusal to deal with a rival.
  1. ASPEN CASE- REFUSAL TO DEAL
  1. WHAT IS MONOPOLY POWER?
In the event that one firm has the majority of the market share and that one firm can determine the conditions of the market as being in a dominant position, it is worth to note that this firm has monopoly power, which can in practice use this power to determine the conditions that can have a negative impact on the smaller competitors. The US Antitrust Law prohibits the monopolies unless they are are not as a result of a natural success or superior product of a firm (legitametely gained monopoly). In other words, it is fair to say that the general standard under Sherman Act is that the criter of ‘harm the rival and competition’ will be considered exclusionary conduct by a monopolist, for which sanctions were foreseen by the Sherman Act.
  1. DOES A MONOPOLY POWER FIRM HAVE THE DUTY TO ENGAGE IN BUSINESS WITH A COMPETITOR?
Section 2 prohibits any concerted and unilateral conducts that are to acquire monopolies. As emphasized by RIEVMAN, due to a lack of a clear definition of an unilateral and anticompetitive conduct in the Act itself, the courts usually define and formalize the elements for an anticompetitive behaviour on a case by case basis (RIEVMAN, 2012).[12] As briefly mentioned above in the Colgate case the court concluded that if a monopolist did not intent to maintain monopoly, its can freely decide whether to deal or with whom to deal. Mostly after the Colgate Case, US Supreme courts adopted the same apporac. Similarly, in Lorain Journal and Aspen Case, the Courts and besides leading scholars revealed that the there is a duty to aid a rival unless a monopolist did not have a valid reason for refusal.[13] Therefore, the entrepreneur has the right to exercise independent discretion in choosing the customers or class of customers with whom he will deal unless this right to choose the customer excludes competition.[14] In Aspen Case it was decided that the offense of monopolization has two element as similarly explained in United States v. Grinnell Corp. that is to say if a firm has a monopoly power in the market who uses this power to create monopoly power which is not an outcome of a superior product or business of this firm. These elements set out by the vested practice of the US Supreme Courts’ decision determines the boundaries of the monopolization which will be considered as a violation of law. In a sense, the refusal to cooperate with a rival can be anticompetitive only under the above mentioned circumstances which is more basically the intent of the monopolist. The Court of Appeal in the Aspen Case took the same approach. The Court of Appeal emphasized that a monopolist's intent should be taken into account when determining whether the challenged conduct is fairly characterized as exclusionary, anticompetitive, or predatory.[15] Unless there is a valid reason for a monopoly power firm to refuse to deal with a rival, it will not be considered as a violation of Sherman Act Section 2, which shall be evaluated by examining the the firms’s intent. Aspen Skiing was not able to support its position that it had a valid business reason when discontinuing to sell a joint marketing product launced and developed by both of the Parties. Aspen Skiing became the only ski resoırt that could offer a multiare ski-ticket to its visitos. Aspen Highlands had a great interest in continuing to sell the all-Aspen tickets and Aspen Skiing’s insistence first on a fixed percentage of the market share of the revenues from these tickets and secondy cancelling a long-lasted practice between the Parties. Without being able to sell tickets to the other mountains, Aspen Highland’s market sahere and revenues declined where at the same time Aspen Skiing’s shares increased sharply. Aspen Skiing’s refusal for a 4 area-mountain ticket also had adverse affect on the "skiers’’ as well. Appeal Court’s decision was later affirmed by the Supreme Court where it rendered that Aspen Skiing had monopolized the market in Aspen. The Supreme Court clerarly stated no monopolist monopolizes unconscious of what he is doing by making reference toBork’s book where he stated that improper exclusion that are not a consequence of a superior business or products is always intended therefore the intend shall be investigated (BORK, 1978). In the actual case, the Supreme Court cocluded that Aspen Skiing did not only rejected to contiune a joint marketing program long lasting between in the Parties but is actually without a valid reason stopped the availability of a tiket that was preferred by the skiers.[16] Therefore paralel to the Supreme Court’s decision one can argue that Aspen Skiing's decision to terminate the all-Aspen wa to determine the conditions of the market and harm the other competitor in the market. Not only to the rival competitor, also consumers were also affected by Aspen Skiing’s unilateral decision. The Supreme Court concluded that where a firm with monopoly power attempts to create monopoly power by restraining the competition in the market with our efficiency concerns, it will be considered a violation of Section 2. If one should examine the consequences of Aspen Highland’s refusal to deal. For whatwever the reason is the strong demand of the skiers for all-Aspen ticket formed over the years, which remained unreciprocaed. Aspen Skiing cancelled a product that allowed the skiers to be flexibale about the mountain to ski each day which was preferred by the the majotiy of the skiers. Besides the consumers, due to Aspen Skiing's pattern of conduct on Highlands together with the additional actions taken by Aspen Skiing Aspen Highlands was prevented from marketing its own product to compete with Aspen Skiing and therefore survive in the market. The Court indicated that underlying norm of ‘efficieny’ was not met as a result of which it is not fair to say that there is a proper exclusion of the monopolist. Aspen Skiing refusal to deal with Aspen Highland was to enforce a power to exclude the competition in the relevant market and could not be explained by a any valid business reason. I belive that the Supreme Court’s decision was right in this respect when considering the reason for termination of the multi area tickets by Aspen Skiing. The reason was that Aspen Skiing was not happy with the accuracy of the ticket monitoring system. However it was later revealed by thevidences before the Supreme Court that Aspen Skiing itself monitored the use of the 3-area passes based on the same system which it claimed to be unproper during the cancellation of the joint product.[17] Therefore this is enough to have a clear indication that Aspen Skiing was enjoying to exclude competition in the market by hamparing a smaller rival. [18] As emphasized by the Supreme Court if there was any valid reason for the refusal then Aspen Skiing would not be considered to be violating Section 2. Because having a monopoly power alone is not a base for a violation instead the conduct itself is important. One should consider whether the conduct namly the refusal of the monopoist to deal is to handicap competitior and whether it benefits the consumers by this conduct, which is definitely not the case in the instant case.[19] When considering the above, parallel to the Supreme Court’s decision, I am of the understanding that the monopolist made an effort to hinder the skiers (customers) to prefer the smaller rival for skiing services and it had no valid reason when doing so. Therefore the monopolist conduct in an anticompetitive or exclusionary way for instance by harming a rival to get higher profit in the market shall be illegal. In other words there are limits of a right of a competitor’s refusal to deal. These limits are vested in the rival’s ability to find new customers and make higher profits. This will be considered sucessful competition.[20] Therefore as emphasized in many US Supreme Court decision a monopolist right to refuse to deal with a rival competitor is not unqauntified.[21] It may give rise to a responsibility unless there is any valid reason to do so. In Lorain Journal Case it was concluded by the Supreme Court that a refusal to deal with a competitor can harm this smaller competitor’s right to select his customers and therefore make benefit in the market. In Lorain Journal case the publisher was considered to be in an attempt to monopolize the market by trying to destroy its small competitor which was a radio station when refusing to sell advertising to persons that patronized the radio station. Finally, in my opinion, In Aspen Case, Aspen Skiing refusal of continuing a joint marketing product with Aspen Highlands resulted in a wane of Aspen Highland’s share in the relevant market. The Court is right in concluding that although there is no general duty to deal with a competitior, monopolist’s refusal to sell a joint ticket program with its rival should be considered as illegal to the extent that this refusal has no valid reason and harms the small competitor(s). CONCLUSION A monopolist duty to deal is considered by case by case approach. As emphasized by many US Supreme Court cases, monopolisy duty to deal with the competitor depends wherher monpolist has a valid reason for that refusal. In Aspen Case, Aspen Skiing’s conduct was to maintain a monopoly without a valid business reason. When considering the essential nature of the All-Aspen Ticket featuring access to all four maountiains Aspen Skiing’s refusal to deal with Aspen Highlands, had limited its facilites to offer its visitors. In my opinion within the framework of the objectives of the competition and consumer welfare, if a monopolist’s refusal to deal harms the smaller competitor and also the consumer, which will be negatively effected by the refusal, this should be considered as violation of Sherman Act if there is no valid reason to refuse and one will be able to argue that a monopoly power firm then has a duty to cooperate with its rival. REFERENCES KUSSE, Kathryn A., Refusal to Deal as a Per Se Violation of the Sherman Act: Russel Stover Attacks the Colgate Doctrine, (1984) Retrieved from http://www.americanuniversitylawreview.org/pdfs/33/33-2/kusske.pdf RIEVMAN, David M., Boston College Law Review, Volume 28, Issue 2, Number 2, Article 7, 3-1-1987, The Grinnell Test of Monopolization Sounds a False Alarm: Aspen Skiing Co. v. Aspen Highlands Skiing Corp. (1987) KÄSEBERG, Thorsten Intellectual Property, Antitrust and Cumulative Innovation in the EU and the US, p.187 (2012) KAPEN Alon Y., Duty to Cooperate Under Section 2 of the Sherman Act Aspen Skiing’s Slippery Slope, Cornell Law Review Volume 72 Issue 5 July 1987 Article 5 ELHLAUGE Einer, GERADIN Damien, Global Competition Law and Economics, 2011, p. 425 R. BORK, The Antıtrust Paradox (1978) CASE REFERENCES Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) United States v. Colgate&Co., 250 U.S. 300 (1919) Lorain Journal v. United States, 342 U.S. 143, 154 (1951) United States v. Citizens & Southern National Bank 422 US 86 1
[1] KUSSE, p. 463 (1984) [2] Colgate, 250 U.S. at 307 [3] Parties had a interchangable ticket program which gives acces to all of the four mountains for the skiers visiting these resorts. [4] Aspen, 472 U.S. 585, at 610-11 [5] Id. at 591; ELHAUGE/GERADIN, p. 415 [6] Id. at 593 [7] Id. at 593 [8] Id. at 590 [9] BORK, p. 344 [10] Id. at 603 [11] ELHAUGE/GERADIN, 447. 415 [12] RIEVMAN (2012), p.415 [13]Lorain Journal v. United States; Verizon vs. Trinko, ifra 524 [14] JONES/ SUFRIN, p.524 [15] Id. at 602-04 [16] Id at 603 [17] Id at 608-10. [18] Id at 608-10. [19] Id at 597 [20] United States v. Citizens & Southern National Bank 422 US 86 [21] Id. at 602
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