Article by Thomas W. Paterson and Willard F. Mueller
Unlawful monopolization under section 2 of the Sherman Act addresses the legality of a firm's market dominance and its exclusionary acts towards competitors. According to the Supreme Court in United States v. Grinnell Corp., two tests determine whether a firm has unlawfully monopolized a market. The firm must first have monopoly power, and also must have willfully acquired or maintained that power as opposed to achieving it from ‘growth or development as a consequence of a superior product, business acumen, or historic accident.’
In Grinnell, the Court explained that monopoly power is the power to control prices or to exclude competitors in the relevant market. The first traditional step in evaluating the presence of monopoly power is to define the relevant product and geographic market. The relevant market is the ‘narrowest market which is wide enough so that products from adjacent areas or from other producers in the same area cannot compete on substantial parity with those included in the market.’ The power to control price or exclude market competitors does not imply that there are two separate standards for determining monopoly power. Because price and competition are intimately related, ‘the usual formulation is merely a convenient way to suggest a single test—whether a firm has sufficient power to raise prices, and whether it could, by lowering prices, exclude competitors from the market.’ Accordingly, monopoly power does not require that prices be set at a profit maximizing level or that competition actually be excluded. As the Supreme Court stressed in American Tobacco Co. v. United States, the material consideration is whether the firm has the power to do these things.
In addition to proving monopoly power, the plaintiff in a section 2 action must establish that the monopolist has engaged or intended to engage in certain prohibited conduct. Specifically, the plaintiff must show that the alleged monopolist intentionally attempted to acquire or maintain monopoly power through unlawful predatory or exclusionary conduct. Conduct that is exclusionary in purpose or function tends to erect barriers to the entry of new firms into the market or to deter the expansion of incumbent firms. Monopoly power acquired due to a superior product, historic accident, or superior business acumen does not violate section 2.
In this Article, we evaluate the application of section 2 of the Sherman Act to agricultural marketing cooperatives. After applying the Grinnell analysis to agricultural marketing cooperatives, we consider evidence that may support a finding of monopoly power and exclusionary intent. We then assess the monopolization case law for cooperatives. In some instances, courts have applied inadequate or improper monopolization analysis to a cooperative. This Article identifies the corresponding implications for liability.
About the Author
Thomas W. Paterson. Attorney, Susman, Godfrey and McGowan, Houston, Texas.
Willard F. Mueller. William F. Vilas Research Professor of Agricultural Economics, Professor of Economics, and Professor of Law, University of Wisconsin-Madison.
Citation
60 Tul. L. Rev. 955 (1986)