Tuesday, October 27, 2009
Posted by D. Daniel Sokol
Not surprising from a law professor who lives in the same town as foodie mecca Zingerman's, Dan Crane (Michigan - Law) explains that Monopoly Broth Makes Bad Soup. Personally, I am a fan of chicken stock. Above cost pricing does not taste the same and lacks that wow factor in soup.
ABSTRACT: There is an oft-repeated maxim that a monopolist’s conduct must be examined in its totality since it is “the mix of various ingredients... in a monopoly broth that produces the unsavory flavor.” This maxim is subject to use and abuse. In this symposium essay, I propose three principles for a correct normative understanding of the “monopoly broth” maxim. First, independently lawful conduct - such as above-cost pricing, refusals to deal, or functionality-enhancing product innovations - should never be added to a “broth” to create liability. Second, where the legality of certain conduct - particularly exclusive dealing, tying, and similar conduct - turns on the degree of market foreclosure, aggregating the defendant’s various exclusive-dealing-like practices is necessary to determine legality. Finally, where the defendant commits independently unlawful acts “such as torts, crimes, breaches of contract, or regulatory violations” that purportedly serve to monopolize the market, the conduct should only be combined in a “broth” for litigation purposes if the plaintiff offers a robust explanation of the synergistic effects of the disparate forms of bad behavior.