Friday, October 1, 2010
Posted by D. Daniel Sokol
Warren Grimes (Southwestern Law) addresses A Tale of Two Ski Towns: New Perspectives on a Dominant Firm’s Refusal to Deal with a Rival.
ABSTRACT: This article reviews prominent criticism of the United Supreme Court’s decision in Aspen Skiing v. Aspen Highlands Skiing Corp. in 1985. The criticism offered by Priest & Lewinsohn, Carlton, and Easterbrook, among others, is anchored on the proposition that a firm with monopoly power should be accorded wide discretion in engaging in a refusal to deal with rivals. After an analysis of the facts of Aspen, I conclude that the Supreme Court’s holding is warranted because of the substantial efficiency gains from the joint conduct, including the offering of an improved product that could not be offered without the joint conduct. The facts of Aspen also suggest that harm to the monopolist’s rival may be exacerbated in industries associated with high fixed and low marginal costs, as is likely the case in the skiing industry. The Court’s decision is also buttressed by the low risk incurred by the defendant monopolist engaging in exclusionary conduct. These conclusions suggest caution in embracing the “profit sacrifice test” or other tests that would tend to shield monopolists from liability for exclusionary conduct.