Dear Readers,
The essential facilities doctrine provides a generally recognized basis for imposing antitrust liability for unilateral refusals to deal. Classically, it has been claimed that a monopolist that denies a competitor access to an input considered an “essential facility” violates section 2 of the U.S. Sherman Act or Article 102 TFEU (and its national equivalents) in the EU, though in Europe the concept is termed as a “refusal to deal” or a “refusal to supply.”
The concept finds its origins in caselaw dating back to the “gilded age” of alleged robber barons. In United States v. Terminal Railroad Association (1912), the U.S. Supreme Court required Jay Gould and others who maintained control over railroad bridges that crossed the Mississippi River to provide access to any competitors who wished to cross. Over the years, Courts and enforcers have invoked the concept in diverse industries ranging from railroads to recreational skiing, energy, groceries, photocopying, newspaper distribution, telecommunications, and professional sports, to name just a few. The popularity and acceptance of the concept has ebbed and flowed over the years, perhaps finding its nadir in the well-known cases of Verizon v. Trinko (2004) in the U.S., and Oscar Bronner v. Mediaprint (1999) in the EU, though it enjoyed a brief resurgence in the time of the EU Microsoft case.
As the contributors to this Chronicle note, the notion of essential facilities is back in the limelight (particularly in terms of its potential application to the modern “platform economy”). Thomas B. Nachbar opens by posing the question of why the essential facilities doctrine has been so popular among recent proponents, while it remains unpopular with courts? He concludes that the doctrine has the unintended effect of shifting attention away from the question of anticompetitive conduct (which ought to be central to any critical analysis). As a result, the author proposes that the concept of essential facilities is better thought of as a “remedy” rather than as a distinct theory of antitrust liability. Taking an equally critical perspective, John M. Taladay likens the recent resurgence of interest in the essential facilities doctrine in colorful terms, casting it as an “infection that has devoured the minds of the zombified.”
Nikolas Guggenberger strikes a contrasting tone, noting that some of the critiques of the doctrine in the past (e.g. allegations that monopolies lack incentives to monopolize adjacent markets and concerns about error costs) are potentially misconceived, and best left behind. Erik Hovenkamp develops further on these ideas, with a specific focus on large online platforms. To the author, the real economic risk raised by platforms is typically that the defendant could be leveraging its control of a dominant platform to foreclose rivals in an adjacent market. He draws an analogy with tying cases like Microsoft rather than classic “refusal to deal” or “essential facilities” cases such as Trinko. The piece goes on to suggest that courts should revise the legal standard used to evaluate refusals to deal by platforms to better capture economic realities.
As Stephen M. Maurer notes, the essential facilities doctrine began as an attempt to reconcile the benefits of competition with those of commonly owned assets. Most judges, however, have evaluated sharing almost entirely through its impact on competition. This simplification was tenable in the past, when network effects were relatively rare and scale economies bounded. Today, product performance can sometimes depend on sharing even more than competition. As a result, sharing and competition are both valuable, and can present difficult tradeoffs. In the author’s view, requiring judges to consider the benefits of synergy coequally with competition will be an essential first step toward rationalizing essential facilities case law worldwide.
Turning to the matter of user data, Chris Riley notes that digital data is both created and used within specific contexts, and its value derives from its use within certain contexts. Looking at personal data through the blunt lens of the essential facilities doctrine risks losing this perspective. The author further notes that meanwhile there have been significant advancements in portability for personal data. As public policy frameworks for data portability continue to develop, the article offers some principles to guide those conversations to reinforce and strengthen the efficacy of data portability.
Finally, Bilal Sayyed closes with a timely discussion of the majority staff report of the U.S. House of Representatives’ recent Investigation of Competition in Digital Markets. Notably, the report recommends that Congress consider revitalizing the essential facilities doctrine and override judicial decisions that have treated unfavorably essential facilities and refusal to deal-based theories of harm. Although the jury remains out on how the report’s conclusions will be implemented, if the report indicates anything, it is that discussion of the topic of essential facilities is not going anywhere soon.
Sincerely,
CPI Team
