Resale Requirements and the Intersection of Antitrust and Regulated Industries

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I. INTRODUCTION

In his forthcoming book, The Antitrust Enterprise, Professor Hovenkamp makes clear that antitrust is simply one of a menu of market-regulating choices available and pursues the interactions among antitrust, intellectual property, and sector-specific regulation. "The antitrust laws are only one among many legal regulators of competition and innovation. Intellectual property laws and market-specific regulations for markets such as telecommunications or electric power also pursue the same ends."1 This fundamental point, which was too often lost during the height of regulated industries law, is particularly salient as many of the traditional utility markets-including especially telecommunications and electricity-move through a transition to more competitive market structures. The Antitrust Enterprise traces the great transformations of antitrust industries law,2 and pays particular attention to the challenges for antitrust of changing market structures, increasingly rapid innovation, and improved economic tools.

In this Essay, I want to tackle a micro-version of this type of project in the context of the Supreme Court's recent decision in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko* In that case, the Supreme Court held that the antitrust laws provided no cause of action to persons allegedly injured by an incumbent local telephone company's refusal to provide access to elements of its network, even though new entrants needed access to those elements in order to compete with the incumbent. The Court's decision turned, in significant part, on the fact that sector-specific regulation (the Telecommunications Act of 1996) governed the incumbents' obligation to make such elements available.

Before the Supreme Court's decision, the Trinko litigation and similar cases4 attracted only the interest of academics that specialized in telecommunications law, although these specialists did recognize the intersection between the telecom issues in those cases and antitrust law more generally.5 The Court's decision, however, has led to a boomlet in writing,6 in part of course because this Supreme Court decides so few antitrust cases that any pronouncement in the field is cause for writing, but more importantly because of the seeming breadth of Justice Scalia's opinion for the Court, which tackles some of the most vexing issues in section 2 jurisprudence (and one of the most loathed antitrust cases of all time, Aspen Skiing7).

In Aspen Skiing, the Court had come fairly close to endorsing an essential facilities doctrine, under which the owner of an input necessary for others to compete in a market would be under an antitrust duty to provide that input. The Court did not endorse the theory,8 but its result-that the Aspen Skiing Company had violated the antitrust laws when it discontinued its cooperation with its local competitor-provided the principal basis for the antitrust claims against incumbent telephone companies. In Trinko, the Court did not disapprove of Aspen Skiing (although it did say that the case was "at or near the outer boundary of section 2 liability") but rather distinguished it. The Trinko Court said that antitrust liability was properly found in Aspen Skiing because of the defendant's "unilateral termination of a voluntary (and thus presumably profitable) course of dealing" and because of "the defendant's unwillingness to renew the ticket even if compensated at retail price."10

This Essay focuses on the second part of the Trinko Court's distinction of Aspen Skiing-the defendant's refusal to sell to its competitor at its retail price. Some commentary has begun to address whether a requirement to sell at retail makes sense as a general antitrust rule, as an exception to the otherwise unrestricted Colgate right of a monopolist "freely to exercise his own independent discretion as to parties with whom he will deal."11 Trinko's reliance on the refusal to sell at retail as the basis of liability in Aspen Skiing strongly suggests that the refusal to sell at a retail price could be important evidence of illicit monopolization under section 2. …