Select Page

Wayne State University Law School
Calkins, Stephen

A. Monopoly – R of R Analysis
Sherman Act-§2 makes it a felony to monopolize, attempt to monopolize, or combine with others to monopolize “any part of trade or commerce”.
I. To prove case :
1) Define Mkt.
A.     Define relevant market and geographic market
1.      Relevant market is based on whether:
a)      the product is reasonably interchangeable
b)      cross-elasticity in demand- i.e. if prices change, customers will buy a different product b/c it is cheaper
2.      Geographic Market is some area in which a firm can increase its price without:
a)      large numbers of customers immediately turning to alternative supply sources outside of the area
b)      producers outside the area quickly flooding the area with substitute products
2) Calculate Monopoly. Power
Monolpoly Power – “Power to control prices or exclude competition” – Dupont Case
B.     Look at Mkt. Share
C.     Look at other barriers to entry
3) – Anticompetitive or Monopoly Conduct must be shown
     -Firm must have committed ACT that must have obtained or maintained monopolistic pos.
II. Monopoly and Market Power
A.     Relevant market
a)      Market defined as the range of products to which consumers would practically switch in response to a price increase in the product in question. RM for Microsoft Windows found to be Intel-compatible PCs(excluding MacOS and handhelds) and thus 95% share. US v. Microsoft.
b)      Where Alcoa dominated virgin aluminum production, as a result also controlled the scrap market. Relevant market is all aluminum available for fabrication. Alcoa.
c)      Reasonable interchangeability Test- DuPont Case – Cellophane “commodities reasonably interchangeable by consumer” High profits or price not an issue
B.     Monopoly. Power –
a)      70-100% share= monopoly
b)      40-70 % share= gray area- may or may not be monopoly depending on circumstances
c)      below 40% share= no monopoly
-Alcoa Case
            Other Factors:
            -Barriers to entry
C. Anticompetitive Action
Act that violates Anti-Trust laws – where oil company used coercive and predatory methods to buy up oil production and distribution capacity in order to gain a 90% market share, it violated §2, which is intended to cover restraints on trade not enumerated in §1. Rule of Reason applies because a per se rule would make illegal the first business in a new trade before any competitors arose, or by normal and legal competition, thus stifling business innovation. Standard Oil Co. v. United States.
Unlawful Acquisition-where aluminu

competitor and increase monopoly. No valid business reasons other than to harm competitor.  Aspen Skiing Co. v. Aspen Highlands Skiing Corp.
Limited by Verizon v. Trinko which stated Aspen at or near outer boundary of §2 liability
Predatory Pricing-violation of §2 must show
Price goods below marginal or incremental cost with the intent of driving competitors out of business &  
Monopoly there is high probably of recoupment of losses after achieved.
                                                               i.      Not Predatory If No Possibility Of Recoupment-both elements of above rule must be satisfied. Where tobacco company that drastically cut prices in price war over generics, scheme as alleged by P not plausible to recoup losses in oligopolistic market. Brooke Group v. Brown and Williamson.
III. Attempt to monopolize-Three elements:
1.      Predatory or anticompetitive conduct
2.      Specific intent to monopolize
·        May be inferred from conduct
3. Dangerous probably of achieving monopoly