Antitrust Litigation
Client Advisory
May 13, 2009
Assistant Attorney General Varney Withdraws
DOJ Single-Firm Conduct Report
by Barbara S. Steiner, John F. Kinney, John J. Hamill and Ashley M. Schumacher
On May 11, 2009, Christine A.
Varney, Assistant Attorney General
in charge of the Department
of Justice’s Antitrust Division,
in a speech at the Center for
American Progress announced
that the Department is withdrawing
effective immediately its 2008
report regarding single-firm
conduct enforcement under
Section 2 of the Sherman Act
and outlined the Division’s overall
enforcement agenda.
protecting consumer welfare, relied
too heavily on economic theory,
and adopted standards stricter
than existing standards defined
by Section 2 case law making it
nearly impossible to prosecute a
case under Section 2.
In her speech – and confirmed
in a May 11 DOJ press release
– Varney stated that the Antitrust
Division was withdrawing the
Report as it no longer represented
DOJ policy regarding antitrust
The September 2008 Department
enforcement under Section
of Justice report, “Competition and
2. As Ms. Varney stated, “the
Monopoly: Single-Firm Conduct
Report and its conclusions
Under Section 2 of the Sherman
should not be used as guidance
Act”[1] (“Report”), was the
by courts, antitrust practitioners,
culmination of a year-long series of
joint DOJ-FTC hearings addressing and the business community.”
issues relating to the enforcement Although commending
the attempt to develop a
of Section 2 with respect to
comprehensive evaluation of
single-firm conduct. The Report
single-firm enforcement and
received considerable criticism,
particularly by three Federal Trade analyze the risks and benefits of
Commissioners (including the new various enforcement strategies,
Varney noted that the Report’s
FTC Chairman, Jon Leibowitz).
conclusions and overly cautious
Criticisms included that it
drastically weakened enforcement approach to enforcement
of Section 2, ignored the goal of
“miss[ed] the mark.”
Varney concluded that the
Report lost sight of protection
of consumer welfare as the
ultimate goal of antitrust laws.
In particular, she concluded
that the Report raised too many
hurdles to effective Government
antitrust enforcement. The limited
enforcement approach outlined
in the Report had been premised
on: (a) skepticism regarding the
ability of antitrust enforcers and
courts to distinguish between
anticompetitive acts and lawful
conduct; and (b) assumptions
regarding a dominant firm’s ability
to act efficiently and whether
markets will “self-police” and “selfcorrect.” Varney rejected those
conclusions and related concerns
that antitrust enforcers--and courts-cannot effectively distinguish
between anticompetitive acts
and lawful conduct. Furthermore,
she criticized the Report’s
“excessive concern with the risks
of over-deterrence and a resulting
preference for an overly lenient
approach to enforcement.”
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Client Advisory
Noting that the Report “advocates
extreme hesitancy in the face of
potential abuses by monopoly
firms,” Varney stated that the
Department “must change
course and take a new tack.” In
particular, Varney rejected the
Report’s conclusion that the
“disproportionality test” (i.e.,
conduct is condemned only if
its demonstrable anticompetitive
effects are “disproprotionately”
greater than its procompetitive
potential) is likely to be the most
appropriate test where conductspecific tests do not apply. In
recognizing the constraints this
test places on antitrust enforcers
and courts redressing monopolistic
abuses, Varney proposed a
strategy grounded in, and guided
by, the “balanced analyses” of
leading case law interpreting
the Sherman Act. Specifically,
Varney cited Lorain Journal v.
United States,[2] Aspen Skiing
Co. v. Aspen Highlands Skiing
Corp.,[3] and United States v.
Microsoft,[4] as examples of
leading Section 2 cases that
highlight the harmful effects of
monopolists’ exclusionary and
predatory conduct on competition
and consumers.
Accordingly, instructive
jurisprudence “set[ting] forth clear
limitations on how monopoly firms
are permitted to behave” will guide
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the Department’s enforcement
of single-firm conduct, rather
than the conclusions developed
in the withdrawn Report. For
example, in Lorain Journal, the
Court expressly rejected that a
newspaper publisher had a “right
as a private business concern to
select its customers and refuse
to accept advertisements from
whomever it pleases.”[5] Similarly,
in Aspen Skiing Co, the Court
reaffirmed that any right of a
monopolist to refuse to deal with
other firms is not unqualified, and
emphasized that, in analyzing such
behavior, courts will consider the
firm’s anticompetitive motivation
and the impact of the conduct
on consumers.[6] Furthermore,
Varney cited United States v.
Microsoft, as providing instruction
that courts will “look closely at
both the perceived procompetitive
and anticompetitive aspects of a
dominant firm’s conduct, weigh
those factors, and determine
whether on balance the net effect
of this conduct harms competition
and consumers.”[7] Varney cited
other examples of cases in which
the Government and private parties
have successfully challenged
exclusionary conduct[8] as “strong
examples…the Department will
look to in establishing Section 2
enforcement priorities.”
Varney also reiterated the
Division’s commitment to
identifying and prosecuting
domestic and international
cartels. She further noted that
the Division was dedicating
significant resources to assist
agencies that receive and spend
economic stimulus funds to
detect and prosecute collusive
and other fraudulent conduct. In
addition, Varney confirmed the
Antitrust Division will aggressively
pursue both merger and nonmerger investigations and will
explore vertical theories and other
new areas of civil enforcement,
especially in high-technology and
Internet-based markets. Finally,
Varney stated that “rigorous
economic analysis” will be the
touchstone for Antitrust Division
policy, with the focus on the
“power of competition in the
market to ensure the American
consumer’s access to the best
products at the lowest prices.”
In sum, Varney took a forceful
stance against the Report’s
approach to enforcement of
single-firm (and other) conduct.
Varney summarized the Antitrust
Division’s position going forward,
stating: “In short, while preserving
the right of firms with market
power to continue to compete, we
cannot allow them a free pass to
undertake predatory or unjustified
May 13, 2009
exclusionary acts.” In this
connection, Varney plainly stated
that “passive monitoring of market
participants is not an option.”
For these reasons, businesses
with high market shares should
carefully analyze their practices in
light of the Department’s plan to
aggressively pursue enforcement
of Section 2 and the related
invitation for aggrieved rivals to
bring complaints of exclusionary
conduct to the Division’s
attention.
Endnotes
[1] Competition and Monopoly:
Single-Firm Conduct Under
Section 2 of the Sherman Act,
United States Department of
Justice (2008) (“Report”).
[2] 342 U.S. 143 (1951).
[3] 472 U.S. 585 (1985).
[4] 253 F.3d 34 (D.C. Cir. 2001)
(en banc).
[5] 342 U.S. at 153, 155.
[6] 472 U.S. at 605-11.
[7] 253 F.3d 34.
[8] See United States v. Dentsply
Int’l, Inc. 399 F.3d 181 (3d Cir.
2005); Conwood Co. v. United
States Tobacco Co., 290 F.3d
768 (6th Cir 2002).
For more information, please contact the following Jenner & Block attorneys:
Barbara S. Steiner
John F. Kinney
John J. Hamill
Ashley M. Schumacher
Partner
Tel: 312 923-2611
Email: [email protected]
Partner
Tel: 312 923-2807
Email: [email protected]
Partner
Tel: 312 923-2684
Email: [email protected]
Associate
Tel: 312 840-8672
Email: [email protected]
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