What Makes a Monopoly Illegal in the U.S.
What Makes a Monopoly Illegal in the U.S.
(Bloomberg Businessweek) -- In the U.S., a company that’s big, dominates its market, and has high prices isn’t necessarily an illegal monopoly. Being the biggest and most powerful company in an industry isn’t a problem, the U.S. Supreme Court has repeatedly decreed, unless the company achieved its position unlawfully—that is, through exclusionary or predatory conduct intended to thwart competitors. To successfully challenge a dominant company, antitrust enforcers have to show that competition is harmed by behavior that has no procompetitive business rationale—such as blocking a rival’s access to the market by entering into exclusive distribution agreements. Here’s how to assess whether the companies are crossing a line.
It would be tough to show that Facebook’s acquisition of Instagram or WhatsApp violates antitrust laws. An enforcer would have to show that the only rationale for the purchases was to remove a competitive threat. The evidence would have to demonstrate that the acquired companies truly were nascent threats when they were acquired and that consumers have been harmed—through fewer privacy protections, for example—by the acquisitions. Facebook has said the purchases are opportunities for it to innovate.
Amazon
Its alleged punishment of Marketplace sellers for offering lower prices on rival websites—those products are harder to find and buy on Amazon—could subject it to antitrust liability. Such actions allegedly have led to higher prices. The company would need to show a procompetitive business rationale for the conduct. Amazon has said it doesn’t retaliate against these sellers.
Google’s dominance in search and its alleged tweaking of its algorithms to exclude competition in some online businesses was deemed illegal in Europe; Google is appealing. The company’s conduct is under review for a second time in the U.S.; the FTC examined it in 2013 but decided against filing a lawsuit. Although it found the changes to Google’s search function harmed competitors, the FTC agreed with Google’s assertion that the changes improved the quality of search results, a benefit to consumers.
Apple
Apple’s requirement that iOS apps for mobile devices be distributed solely through its App Store, along with its alleged obstruction of competitors such as Spotify, has been criticized as predatory and anticompetitive. Apple must demonstrate procompetitive business reasons for its conduct—better security and performance, for example— to win any challenge. Apple has said the App Store is a new marketplace that has allowed Spotify to thrive and created opportunities for artists and entrepreneurs.
—Jennifer Rie is a reporter for Bloomberg Intelligence.
To contact the editor responsible for this story: Dimitra Kessenides at dkessenides1@bloomberg.net
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