Exclusionary Conduct under Antitrust Law
Exclusionary Conduct Under Antitrust Law
Definition:
Exclusionary conduct refers to actions taken by a firm—often one with market power—that are intended to suppress or eliminate competition, rather than compete on the merits. This conduct can violate antitrust laws, particularly under Section 2 of the Sherman Act (in the U.S.), which prohibits monopolization, attempted monopolization, or conspiracy to monopolize.
Key Elements of Exclusionary Conduct:
Possession of Market Power
The firm engaging in the conduct typically must have significant market power or be a monopolist.
Anticompetitive Purpose or Effect
The conduct must harm the competitive process, not just competitors.
The focus is on whether the behavior excludes rivals unfairly rather than improves the firm’s own efficiency or innovation.
Lack of Legitimate Business Justification
Courts consider whether the conduct has procompetitive justifications (e.g., cost savings, innovation).
If a legitimate reason exists, courts balance it against the anticompetitive effects.
Examples of Exclusionary Conduct:
| Type | Description | Example |
|---|---|---|
| Predatory Pricing | Selling below cost to drive out competitors, then raising prices later | A firm undercuts rivals with unsustainably low prices |
| Exclusive Dealing | Forcing or incentivizing customers not to deal with competitors | A supplier gives discounts only if retailers don’t stock rival products |
| Tying and Bundling | Making the purchase of one product conditional on buying another | A software company requiring use of its browser with its OS |
| Refusal to Deal | Unjustified refusal to sell to a rival or a critical input provider cutting off access | A dominant firm refusing to provide access to essential infrastructure |
| Loyalty Rebates | Price reductions conditional on buying primarily or exclusively from the dominant firm | A manufacturer offers rebates only if 90% of the customer’s purchases come from it |
Legal Standards (U.S. Focus):
Sherman Act § 2: Prohibits monopolization or attempts to monopolize.
Rule of Reason: Most exclusionary conduct is analyzed under this rule—courts weigh anticompetitive harm against procompetitive benefits.
Consumer Harm: The ultimate test is whether the conduct harms consumers by reducing competition (e.g., higher prices, less innovation).
Notable Cases:
United States v. Microsoft Corp. (2001)
Microsoft was found to have maintained its OS monopoly by anticompetitive tying and exclusionary contracts.
Aspen Skiing Co. v. Aspen Highlands Skiing Corp. (1985)
A dominant firm’s refusal to cooperate in a joint ticketing venture was deemed exclusionary.
Verizon v. Trinko (2004)
A more restrained view of refusal-to-deal claims; court emphasized limits to antitrust intervention.
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