ProMarket - Antitrust Law’s Unwritten Rules of Unfair Competition

Sandeep Vaheesan, legal director, argues that the Federal Trade Commission should use its expansive “unfair methods of competition” authority to codify and strengthen existing norms of fair competition under the Sherman Act.

Is competition always good? According to many antitrust enforcers, judges, and scholars, the answer is yes. When debating the purpose of the Sherman Act and its antimonopoly provision (Section 2) in particular, they declare that Congress enacted the law for “the protection of competition, not competitors.” They describe desirable business conduct that the law should bless as “procompetitive” and undesirable conduct that the law should restrict as “anticompetitive.” Even some in the progressive reform camp treat competition as an unalloyed good and contend that “the protection of the competitive process” is the correct aim of antitrust law.

Yet, a careful examination of the case law reveals a more nuanced picture, in which the courts do not indiscriminately protect competition. In interpreting Section 2, the Supreme Court and federal courts of appeals have for more than a century restricted certain forms of competition as unfair. Rather than protect all methods of business rivalry, as I explain in a forthcoming law review essay, the courts hold that certain forms of competition are illegal. What normative principles inform the legal restrictions on particular competitive practices? Judicial interpretations of antitrust law limit firms’ ability to obtain or maintain a monopoly using their market dominance, advantageous access to finance, or practices generally prohibited by other laws. These underlying norms of unfairness are, however, rarely acknowledged openly in antitrust complaints and decisions. Without an honest acknowledgement of this morality, we can only discuss what practices the Sherman Act should proscribe, not why the law should proscribe them. The Federal Trade Commission (FTC) can provide philosophical clarity and a practical way forward. To make the current antitrust morals of the marketplace explicit and strengthen their legal force, the FTC should codify the Sherman Act’s implicit norms of unfair competition.

In interpreting Section 2 of the Sherman Act, the Supreme Court has held that monopoly power alone is not sufficient to violate the law. In a seminal 1966 decision called United States v. Grinnell Corp., the Court ruled that “[t]he offense of monopoly under § 2 of the Sherman Act has two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” The Court was clear that monopoly itself, as well as certain forms of acquiring or preserving a monopoly, were legal under Section 2. For example, a firm that produces and markets more efficient rooftop solar panels and captures the entire market, as a result, is not guilty of monopolization.

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