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Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Saturday, June 23, 2007

Defining Exclusionary Conduct Under Section 2: The Case for Non-Universal Standards

Posted by D. Daniel Sokol

Marina Lao of Seton Hall Law School takes on the difficult task of coming up with a conherent approach to liability under Sherman Section 2 in her new chapter titled Defining Exclusionary Conduct Under Section 2: The Case for Non-Universal Standards in the latest edited volume of the proceedings of the the annual Fordham antitrust conference that Barry Hawk organizes.

ABSTRACT: Recent antitrust cases, such as Trinko, Microsoft, LePage's, and AMR, have focused attention on the uncertain "exclusionary conduct" doctrine under section 2 of the Sherman Act, leading to a renewed debate on the appropriate legal standards to define such conduct, and the proposal of several competing liability standards. Most of the proposed tests offer a single standard to govern all exclusionary conduct.

Although the idea of a universal test is attractive initially, for reasons addressed in the paper, the application of any single standard to all allegedly exclusionary conduct would lead to dangers of either false positives or false negatives, and would necessarily either overdeter competitive conduct or underdeter anticompetitive conduct. This paper discusses the three main proposed tests - the "no economic sense" variant of the "profit sacrifice" test, the "excluding equally efficient competitor" test, and the consumer welfare test - and explains that, while each of these tests may be effective for some types of exclusionary conduct, it would be inappropriate as a universal test.

This paper proposes, instead, a workable and theoretically reasonable approach that uses different tests for different types of exclusionary conduct. The challenge in fashioning a non-universal approach is to ensure coherence and practicality, and minimize uncertainty. This paper offers a theoretically based and workable method for accomplishing that. The approach takes into account a few factors relevant to how tolerant or intolerant an antitrust rule should be: false positives and false negatives; expected benefits from antitrust remedy; and overdeterrence and underdeterrence. Finally, the paper addresses a few objections that are likely to be made to a non-universal approach.

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