Wednesday, September 22, 2021

The Antitrust Duty to Deal in the Age of Big Tech

The Antitrust Duty to Deal in the Age of Big Tech



Erik Hovenkamp

University of Southern California School of Law



The antitrust duty to deal is perhaps the most confounding and controversial form of antitrust intervention. It is sought by plaintiffs in situations where a monopolist controls a critical input (or “essential facility”) and unilaterally refuses to sell access to rivals. Courts have substantially narrowed the doctrine in recent decades. However, the prevalence of dominant platforms like Google, Facebook, and Amazon has provoked intense debate over whether the antitrust duty to deal needs a revival. Many such platforms are accused of refusing to deal with (or otherwise discriminating against) rivals in adjacent markets.

The debate centers mainly on what a plaintiff should have to show to trigger a duty to deal. However, I argue that this overlooks the most pressing problem, which is not the standard of liability but rather its domain: the set of cases in which it must be applied. At present, this domain is far too broad, conjoining two very different lines of cases that have no business being evaluated under a common standard. In one line of cases, the defendant’s refusal raises substantially the same theory of harm as tying or related vertical restraints. However, formalistic legal doctrine prevents plaintiffs from challenging them as such. As a result, these cases almost never receive meaningful scrutiny. This is problematic, because a large majority of meritorious refusal-to-deal cases fall into this category. It also happens to include almost all cases involving platform defendants.

In a separate line of cases, intervention is much harder to justify on economic policy grounds, as it carries a serious risk of chilling investment in valuable new technologies. Courts often acknowledge this investment concern in dicta, but the operative liability standard—which focuses myopically on exclusion—ignores it. Consequently, there is a major disconnect between what courts say in dicta and what the underlying standard of liability says. The dicta says that a duty to deal is almost never warranted. But simple economic arguments show that the refusals in these cases are routinely exclusionary in precisely the sense that the law purports to condemn. This internal conflict has led courts to erect suffocating proof requirements that bear little logical connection to exclusion. These evidentiary rules do most of the heavy lifting in practice, and they excel at avoiding excessive liability. The problem is that they also kill off all the meritorious cases.

This paper argues that any effective reform must begin by disentangling these distinct lines of cases. As I explain, there is a natural way to do this that would help to address many of the key concerns raised on both sides of the debate. This approach offers many policy benefits. First, it protects investment incentives without needlessly stifling antitrust enforcement in meritorious cases. Second, it naturally limits antitrust scrutiny to those cases in which intervention is most likely to be administrable. Third, it is exactly analogous to the way antitrust already treats other forms of unilateral conduct. Finally, in contrast to the status quo, this approach would allow for meaningful antitrust scrutiny of unilateral conduct by dominant platforms—an objective that has recently received bipartisan support in Congress.

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