Abolishing the Price Squeeze as a Theory of Antitrust Liability

J. Gregory Sidak

2/25/2015

A “price squeeze,” or “margin squeeze,” is a theory of antitrust liability under section 2 of the Sherman Act that concerns a vertically integrated monopolist that sells its upstream bottleneck input to firms that compete with the monopolist’s production of a downstream product sold to end users. At issue is the size of the margin between the monopolist’s input price and its retail price. Recent antitrust price-squeeze cases have split the U.S. Courts of Appeals. The D.C. Circuit has concluded that, because a vertically integrated monopolist may refuse to provide its upstream inputs to its downstream competitors, it may raise the price of its upstream inputs without incurring antitrust liability. On the other hand, the Ninth Circuit’s 2007 linkLine decision rejected such reasoning, notwithstanding Trinko. Predicated on Judge Learned Hand’s opinion in Alcoa, linkLine subordinates the protection of consumers to the protection of competitors. It requires access-pricing analysis that more resembles the work of a public utilities commission than that of a federal judge in an antitrust case.