1. Legal and enforcement framework
1.1. Which legislative and regulatory provisions regulate dominance in your jurisdiction?
In the United States, there are both federal and state regulatory statutes that govern monopoly (dominance).
At the federal level, there are three principal statutes that govern monopoly:
- Section 2 of the Sherman Antitrust Act, 15 USC § 2;
- Sections 7 and 7A of the Clayton Act, 15 USC § 18/18A; and
- Section 5 of the Federal Trade Commission Act, 15 USC § 45.
At the state level, each state has its own statutes that govern monopoly (dominance).
1.2. Do any special regimes apply in specific sectors?
In the United States, both federal and state monopoly laws apply to all industries and commercial sectors. Federal antitrust laws apply to interstate commerce, while state antitrust laws apply to each state's portion of interstate commerce.
1.3. Is the legislation intended purely to protect economic interests or does it have other aims?
In the United States, the goal of the antitrust laws is to protect and promote free and fair competition which benefits the market participants (ie, consumers) through lower prices, better-quality products and services and greater choices.
1.4. Which authorities are responsible for enforcing the legislation?
In the United States, there are two federal regulators which are responsible for the enforcement of the federal antitrust laws:
- the Department of Justice's Antitrust Division; and
- the Federal Trade Commission (FTC).
The Antitrust Division alone oversees the criminal enforcement of the Sherman Antitrust Act and co-oversees the civil enforcement of the Clayton Act with the FTC. The FTC alone oversees the enforcement of the Federal Trade Commission Act. At the state level, the attorneys general of each state are responsible for enforcing each respective state's antitrust laws. Federal and state antitrust regulators can investigate potential monopolisation without court intervention (under certain circumstances), and/or seek court intervention to enjoin monopolistic behaviour or prevent the consummation of transactions that may create a monopoly (under certain circumstances).
1.5. How active are the enforcement authorities in taking action against abuse of dominance in your jurisdiction? What key decisions have the enforcement authorities adopted most recently?
In the United States, federal and state regulatory enforcement of the monopoly laws has focused on prevention in the form of pre-merger and merger analysis. Antitrust regulators have infrequently brought major civil lawsuits alleging monopolisation in the United States (eg, AT&T (1974) and Microsoft (1998)). In late 2020, however, the Antitrust Division and 11 state attorneys general filed a civil lawsuit alleging monopolisation by Google. Also in late 2020, the FTC filed a civil lawsuit alleging monopolisation by Facebook. The FTC was successful in amending its civil complaint against Facebook and survived Facebook's motion to dismiss. Numerous state attorneys general also filed a civil complaint alleging monopolisation against Facebook, but that complaint was dismissed and is currently on appeal. It is reasonable to expect that both the Antitrust Division and the FTC will continue to focus on large technology companies and their potential to monopolise one or more technology markets in the United States – at least during the Biden administration's term.
2. Definitions and scope of application
2.1. What parties are covered by the dominance legislation? Are any exemptions available?
In the United States, the state and federal monopoly laws reach all private parties in all industries and all commercial sectors. Thus, the antitrust laws – including monopoly laws – do not apply to the conduct of the states themselves or to state actors (under certain circumstances). There are numerous exemptions and immunities to the antitrust laws, including monopoly laws, that were created either by federal legislation or by the federal courts.
2.2. How is 'dominance' defined in your jurisdiction?
In the United States, the term 'monopoly' is thought of as a firm's possession of market power sufficient to control prices and supplies and exclude competitors in a relevant market. That said, the existence of monopoly is not itself unlawful. Neither is monopoly lawfully acquired or maintained. Rather, monopoly becomes unlawful only when it is acquired or maintained by improper means, referred to as 'anti-competitive conduct'. In sum, then, a firm that possesses sufficient market power in a relevant market that engages in anti-competitive conduct to acquire or maintain that power is said to have 'monopolised' that relevant market.
2.3. How important is market share in assessing dominance in your jurisdiction? Do specific thresholds apply in this regard?
In the United States, the existence of monopoly power and monopolisation can be determined by direct or circumstantial evidence. Direct evidence of monopoly power can come in the form of evidence demonstrating the actual control of prices, supplies and/or the exclusion of competitors – in other words, proof of actual detrimental effects on competition, such as direct evidence of a firm's ability to profitably raise prices substantially above the competitive level. Circumstantial evidence of monopoly power can come in the form of the possession of a sufficient percentage of a relevant market.
The percentage of a relevant market is determined through a structural analysis, by first defining a relevant market (as to both a relevant product (or service) and a relevant geography) and then deducing the percentages attributable to the participants in that relevant market. The possession of a sufficiently high percentage of the market (i.e., a dominant share) can be used to infer monopoly power. No specific percentage of power equates to a finding of monopoly power; but generally speaking, some percentage at or over 65% of a relevant market tends to circumstantially suggest the existence of monopoly power.
2.4. What other factors are considered when assessing dominance?
In the United States, in addition to evidence of the power to control prices, supplies and exclude competitors, evidence of barriers to entry and a reduction in the number of existing and potential competitors that could increase their output are considered in the analysis.
2.5. How are the product and geographic markets defined in your jurisdiction?
In the United States, a relevant antitrust market is made up of two constituent parts: a relevant product (or service) market and a relevant geographic market. The relevant market is also referred to as the 'area of effective competition'. The existence of a relevant product market is determined by examining demand substitution factors. Which products are close economic substitutes for another product or products? Economic substitutes are not to be confused with economic complements. Demand substitution principles attempt to address the following question: to what extent would consumers shift their purchasing behaviour from one product to another in response to a certain price increase or reduction in product quality? This concept is also referred to as the 'cross-elasticity' of demand. Other practical indicia of a relevant product market include:
- the public or industry's recognition of the market; and
- the product's unique characteristics and uses in relation to its price.
Hypothetical monopolist tests are frequently used by regulators to help define the relevant product market. As to a relevant geographic market, the question is: where do consumers look to find substitutable products? In other words, where do sellers operate and where can purchasers predictably look to purchase such products? Are the products found worldwide, nationwide or regionally? The geographic area is informed by the location of buyers and sellers in relation to one another.
2.6. Does the dominance legislation make any distinction between dominant purchasers and suppliers?
In the United States, monopoly (seller dominance) and monopsony (buyer dominance) are treated identically.
2.7. Is collective dominance recognised in your jurisdiction? If so, how is it defined?
In the United States, the legal theory of 'shared monopoly' (or 'shared monopsony') is infrequently advanced and has often been rejected by federal courts.
2.8. What is the statute of limitations to prosecute abuse of dominance cases in your jurisdiction?
In the United States, under federal law, an antitrust action – including one for monopolisation – must be commenced within four years of the date on which when the action begins to accrues (Clayton Act, 15 USC § 15b). Under certain circumstances, however, principles of fraudulent concealment and a continuing violation can alter when the action begins to accrue. Under state law, each state has its own statute of limitations period.
3. Abuse of dominance
3.1. How is 'abuse of dominance' defined in your jurisdiction?
In the United States, the mere possession of monopoly power alone is insufficient to support a finding of monopolisation. Monopolisation requires the possession of monopoly power in a relevant market coupled with anti-competitive conduct to acquire or maintain that power. That said, there are two approaches to monopoly. The first is forward looking (preventative) and is based on Section 7A of the Clayton Act (15 USC § 18A), which examines the effect of a proposed merger or acquisition (of stock or assets) in a relevant market. The question is whether the potential effect of a merger or acquisition "may be substantially to lessen competition, or to tend to create a monopoly" in any line of interstate commerce. In other words, what is the likelihood for monopoly to exist if the merger or acquisition is consummated? The second approach is more of a traditional approach to monopoly law: what is the actual anti-competitive effect on competition? As to mergers and acquisitions, Section 7 of the Clayton Act (15 USC § 18) asks whether the effect of a prior consummated merger or acquisition "may be substantially to lessen competition, or to tend to create a monopoly" in any line of interstate commerce. By contrast, Section 2 of the Sherman Act (15 USC § 2) asks whether a monopolist's conduct was sufficiently exclusionary to "unreasonably restrain" interstate commerce. The analysis is referred to as 'the rule of reason', which asks whether the anti-competitive effects of the monopolistic restraint are outweighed by any pro-competitive effects in the effective area of competition. Section 2 of the Sherman Act makes unlawful not only the completed act of monopolisation, but also attempted monopolisation and conspiracy to monopolise. While Section 2 of the Sherman Act makes monopolisation, attempted monopolisation and conspiracy to monopolise criminal acts, these are very rarely prosecuted criminally. Furthermore, the Federal Trade Commission's (FTC) authority extends to prevent the formation of monopoly under Section 5 of the Federal Trade Commission Act (15 USC § 45).
3.2. What specific types of conduct constitute an abuse of dominance in your jurisdiction?
In the United States, once an entity is found to possess monopoly power in a relevant market, how that entity acquired or maintained that power becomes the focus. The acquisition or maintenance of monopoly power as a consequence of a superior product, business acumen or historical accident is lawful. The acquisition or maintenance of monopoly power in a relevant market by exclusionary means, by contrast, can lead to a finding of monopolisation. Such conduct can exist, for example, in the misuse of contract devices or IP rights. Evidence of improper leveraging or predatory pricing may also be relevant. Recently, the FTC has advanced the theory that a firm's prior acquisition of one or more nascent competitors can furnish evidence of exclusionary conduct.
3.3. On what grounds may the enforcement authorities commence an abuse of dominance investigation?
In the United States, M&A transactions (and parties) of a certain size must notify the Antitrust Division and the FTC prior to consummation, to give the regulators time to analyse the potential for monopoly (Section 7A of the Clayton Act (15 USC § 18A)). Potential mergers or acquisitions that pose a serious risk of monopoly can be challenged to enjoin the consummation or be permitted to consummate with certain competitive restrictions or divestiture requirements. As to closed mergers or acquisitions, or to conduct of targets suspected of monopolisation, the Antitrust Division and the FTC can initiate an investigation to determine whether monopolisation has occurred. The same is true for the state attorneys general within their own states. Furthermore, the FTC's authority extends to prevent the formation of monopoly under Section 5 of the Federal Trade Commission Act (15 USC § 45).
3.4. What powers do the enforcement authorities have in conducting their investigation?
In the United States, both the Antitrust Division and the FTC may issue civil investigative demands (CIDs) to the entity under examination, as well as to industry participants in the relevant market. The FTC can initiate its own investigation into monopoly. The Antitrust Division can file a civil lawsuit in federal court alleging monopolisation or can seek to enjoin the consummation of a proposed merger or acquisition. The state attorneys general of each state can file a civil action in federal or state court.
3.5. Is there an opportunity for third parties to participate in the investigation?
In the United States, third parties are permitted to complain to the federal or state regulators and/or to give evidence in support of a civil action brought by a federal or state regulator. In addition, it is quite common for third-party market participants to receive CIDs from a federal or state regulator to gather evidence of monopoly.
3.6. What are the general rights and obligations of the enforcement authorities during the investigation?
In the United States, federal and state regulators have the authority to investigate monopolisation claims and use discovery tools – including CIDs and depositions – as to the target and interested parties within the industry.
3.7. What are the general rights and obligations of the target company during the investigation? What are the general rights and obligations of individuals targeted during the investigation?
In the United States, while federal and state regulators have the authority to investigate monopolisation claims and use discovery tools – including CIDs and depositions – as to the target and interested parties within the industry, targets and interested parties have rights as well. Targets have the right to:
- defend themselves against allegations of monopolisation or achieving monopoly through a merger or acquisition; and
- offer defensive evidence that the target did not (would not) acquire monopoly power in the relevant market or that the relevant market itself was improperly defined.
Interested parties on both sides of the government's position could get drawn into the investigation, willingly or not. Interested parties may receive third-party subpoenas from the government (CIDs) or from the target itself requesting documents and/or depositions. Interested parties have rights to limit the scope of such discovery devices or seek protections from a court of proper jurisdiction.
3.8. What factors will the enforcement authorities consider in assessing whether an abuse of dominance has taken place?
In the United States, federal and state regulators (and courts) consider a wide variety of relevant market factors, including potential competitive and anti-competitive features of an alleged restraint, in analysing monopoly.
3.9. In case of a finding of abuse of dominance, can the company seek to negotiate a settlement or similar resolution? If so, what is the process for doing so?
In the United States, federal and state regulators can (under certain circumstances) suggest remedial changes with a target during an investigation to avoid a monopolisation determination, including but not limited to structural changes, such as sale of certain assets or lines of businesses – particularly within the ambit of pre-merger investigations under Section 7A of the Clayton Act (15 USC § 18A).
4.1. What defences are available to companies in response to enforcement?
In the United States, targets of monopoly investigations will challenge the breadth and scope of the federal regulator's defined relevant market (product and geography) to minimise market power. Under the rule of reason, the target will argue that the pro-competitive effects outweigh any anti-competitive effects in the effective area of competition.
4.2. Can companies avail of leniency in abuse of dominance cases?
In the United States, the concept of leniency is not relevant in monopoly investigations. Leniency concepts are largely reserved for per se horizontal conspiracy restraints (criminal violation of Section 1 of the Sherman Act (15 USC § 1). Leniency in that context applies to corporations and to individuals facing criminal liability for these types of horizontal restraints.
5. Remedies and sanctions
5.1. What remedies and sanctions may be imposed for abuse of dominance? Can sanctions be imposed on individuals?
In the United States, federal and state antitrust regulators can seek to impose injunctions and structural remedies; they may seek to enjoin a proposed merger altogether or seek to negotiate a settlement (ie, consent decree) to permit a proposed merger to consummate with modifications. Regulators may also seek:
- to monitor injunctive relief;
- to have a previously consummated merger completely unwound; and
- to recover their costs associated with bringing an action against the target.
Private parties, on the other hand, can also seek monetary damages in addition to injunctive relief for their antitrust injuries.
5.2. How are the remedies and sanctions in abuse of dominance cases determined?
In the United States, courts impose injunctive and structural relief for monopolisation to avoid future harm to competition. Monetary damages can be awarded to private plaintiffs to compensate them for their individual antitrust injury (business or property losses). Private plaintiffs can also seek:
- reimbursement of their attorneys' fees and costs; and
- a trebling of their actual damages.
5.3. Can the enforcement authorities impose remedies and sanctions directly or is court action required?
In the United States, federal and state antitrust regulators may impose remedies that are agreed to with a target under a consent decree. Otherwise, the remedies themselves are imposed and enforced by courts.
6.1. Can the defendant company appeal the enforcement authorities' decision? If so, in what forum and what is the process for appeal?
In the United States, a defendant in a civil action may have the ability to appeal a final judgment, assuming that all predicate requirements for an appeal are satisfied.
6.2. Can third parties appeal the enforcement authorities' decision, and if so, in what circumstances?
In the United States, a third party to the civil action has no appellate rights.
7. Private enforcement
7.1. Are private enforcement actions against abuse of dominance available in your jurisdiction? If so, where can they be brought?
In the United States, under federal law, a private person (corporate or individual) that is directly injured by monopolistic conduct may bring a civil action in a federal court seeking to recover:
- injunctive relief;
- attorneys' fees; and
Actual damages are automatically trebled. Each state may have its own specific requirements for private civil actions alleging monopolisation.
7.2. Are class actions or other forms of collective action available in your jurisdiction?
In the United States, under federal law, private class actions are permitted in federal court seeking to recover damages, injunctive relief, attorneys' fees and costs for monopolisation.
Each state may have its own specific requirements for private civil class actions alleging monopolisation.
7.3. What process do private enforcement actions follow?
In the United States, under federal law, private parties may seek to recover actual damages, injunctive relief, attorneys' fees and costs for monopolisation. Actual damages are automatically trebled by statute. Each state may have its own specific requirements for private civil actions alleging monopolisation. The statute of limitations plays a role in every private party civil action.
7.4. What types of relief may be sought and what types of relief are most commonly awarded? How is the relief awarded determined?
In the United States, under federal law, private parties may seek recover actual damages, injunctive relief, attorneys' fees and costs for monopolisation. Actual damages are automatically trebled by statute. Each state may have its own specific requirements for private civil actions alleging monopolisation.
7.5. Can the decision in a private enforcement action be appealed? If so, to which reviewing authority?
In the United States, under the federal court system, a final decision of a US district court may be appealed to a specific US court of appeals and subsequently to the US Supreme Court. Each state court system has a similar appellate track for final decisions from the trial court to the state court of appeals to the state supreme court.
8. Trends and predictions
8.1. How would you describe the current dominance enforcement landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
In the United States, prior to 2020, federal and state antitrust regulators were not particularly interested in bringing large monopoly claims under Section 2 of the Sherman Act. They were active in pre-merger and merger enforcement under Sections 7 and 7A of the Clayton Act. With the advent of the recent suits against Google and Facebook, and the intent of the Biden administration to significantly increase antitrust enforcement in the area of monopoly, we would expect to see a significant uptick in monopolisation claims against large technology companies. This expectation is underscored by President Biden's Executive Order on Promoting Competition in the American Economy (14036) (9 July 2021); and by the actions of new Federal Trade Commission Chair Lina Kahn and the new head of the Antitrust Division, Jonathan Kanter – both of whom are committed to increasing antitrust enforcement in the United States.
9. Tips and traps
9.1. What would be your recommendations to companies to avoid an abuse of dominance charge and what potential pitfalls would you highlight?
In the United States, monopoly will be on the radar of federal and state antitrust regulators from 2021 to 2024. Once monopoly power is achieved (in a properly defined relevant market), the entity possessing that power must act with due care in exercising it. Seek advice and counselling from antitrust lawyers frequently. Finally, companies large and small should have a robust antitrust compliance programme that practically addresses the various aspects of the US antitrust laws applicable to each company's business in the industries it serves.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.