AAI Calls on Eleventh Circuit to Reject Request to Further Empower Monopolists (McWane v. FTC)

The AAI has filed an amicus brief in the Eleventh Circuit in support of the Federal Trade Commission in McWane v. FTC. In February 2014, the FTC affirmed the finding of an administrative law judge that McWane had used exclusive dealing with distributors to illegally maintain its monopoly in the domestic ductile iron pipe fittings market. In a petition for review seeking to overturn the Commission’s decision, McWane argued that the Commission could not establish harm to competition because it relied on harm to McWane’s only competitor, and because that competitor was less efficient than McWane.

The AAI urged the Eleventh Circuit to reject McWane’s reasoning, which would lead to unprecedented and unwarranted burdens and restrictions on plaintiffs.  The AAI brief argues that McWane, as well as dissenting Commissioner Wright and a group of their supporting academic amici, have proposed legal and economic standards that would deal a serious blow to competition and consumer welfare in both the short and long term.

The AAI brief challenges the assertion that the FTC failed to prove illegal monopoly maintenance. The Commission found that McWane’s exclusive dealing had blocked rivals from reaching customers through the most efficient channels of distribution. Although McWane’s exclusionary conduct did not foreclose rivals entirely, modern economic learning and decisions like United States v. Microsoft and United States v. Dentsply recognize that monopoly power can still be unlawfully preserved under such circumstances. When it is, competition is harmed, including if the excluded rival is a less-efficient competitor.  The Commission also properly credited evidence on price effects, market structure, exclusionary intent, and the lack of efficiencies from McWane’s exclusive dealing.

The AAI brief, approved by the AAI Board of Directors, was written by AAI Senior Counsel Randy Stutz and Special Counsel Sandeep Vaheesan, with assistance from Advisory Board members Dan Gustafson, Steve Salop, and Jon Baker and Research Fellow Geoff Kozen.