'Why can't a woman be more like a man?': American and Australian approaches to exclusionary conduct

Melbourne University Law Review, Dec, 2007 by George A. Hay, Rhonda L. Smith

In Weyerhaeuser, the US Supreme Court, in deciding that the Brooke Group predatory pricing standards should apply to predatory buying as well, (38) stressed the symmetry of predatory pricing and predatory buying, (39) repeated the rationale for a conservative approach to predatory pricing--successful attempts to engage in predatory pricing are rare, failed attempts are good for consumers and Type I errors in prosecution will deter socially desirable aggressive price competition (40)--and determined that the same conservative approach should apply to alleged predatory buying. (41)

So, the bottom line on these cases is that the US Supreme Court has moved to an extremely conservative position, making it very difficult for a plaintiff to succeed in a predatory pricing or predatory buying case. It has done so quite deliberately, over a concern that any effort to enhance deterrence of predation by large firms against small ones will actually have the effect of deterring a large firm from reducing its selling prices (42) (or increasing the quantity of inputs it purchases) (43) and that, overall, consumers will be worse off. Hence, the interests of consumers are given complete priority over any concerns about the difficulties faced by smaller competitors when matched up against large firms. Contrast this with the outcry that ensued following the High Court of Australia's decision in Boral Besser Masonry Ltd v Australian Competition and Consumer Commission ('Boral') (44) based on a concern about small businesses and the call for legislative efforts to 'fix' the TPA to deal with the alleged problem that resulted in the Birdsville Amendment. (45)

B Refusal to Deal or Cooperate with Rivals

This issue typically arises when a vertically integrated firm--one that is active in both upstream and downstream markets--has little or no competition upstream but faces actual or potential competition in the downstream market. If the output from the upstream production is necessary to the production of the downstream product, the downstream competitors will want to obtain supply from the monopolist upstream producer. If it refuses to supply, or refuses to supply at a reasonable price, the unintegrated downstream firms will be at a significant disadvantage. The claim will be made that, by refusing to deal, the upstream monopolist has used its upstream advantage to achieve a monopoly in the downstream market as well. Therefore, even if the integrated firm did nothing unlawful to achieve or maintain its monopoly in the upstream market, the use of leverage to achieve or maintain a monopoly downstream is alleged to be anti-competitive and unlawful.

The oft-cited US case involving refusal to deal is Otter Tail Power Co v United States ('Otter Tail'). (46) The Otter Tail Power Company ('Otter Tail Co'), a vertically integrated supplier of electric power, refused to sell or transmit power to four municipal cooperative organisations, each of which wished to displace the Otter Tail Co as the retail supplier of electricity to their town, but needed to obtain their power by purchasing from the Otter Tail Co on a wholesale basis. (47) Thus the upstream product was wholesale power supply and the downstream product was the retail distribution of electricity to homes and businesses in the four towns. The US Supreme Court held that, even though the Otter Tail Co had presumably obtained its upstream monopoly lawfully, it was a violation of [section] 2 of the Sherman Act for a monopolist in the upstream market to refuse to deal where the purpose and effect of that refusal was to allow it to maintain its monopoly in the downstream market where there was at least the potential for competition. (48) It is worth noting that commentators, especially foreign commentators, frequently cite Otter Tail as illustrating the so-called 'essential facility' doctrine as if that were some special branch of, or exception to, traditional Sherman Act [section] 2 jurisprudence. (49) The US Supreme Court, however, never used that term, and decided the case on what it believed to be quite traditional Sherman Act [section] 2 grounds.