Antitrust Division Deputy Assistant AG Considers "Refusals to Deal" for Digital Platforms

Antitrust Division Assistant Attorney General Michael Kades examined the legal concept of "refusal to deal" in digital markets arguing that defining the principle too broadly would "create a loophole allowing anticompetitive conduct" that would "increase prices and reduce innovation."

In remarks at the University of Virginia School of Law, Mr. Kades reviewed the 2004 Supreme Court opinion in Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, which addressed whether Verizon had, by refusing to deal with a competitor, "engaged in illegal monopolization." Citing the 2021 decision to dismiss State of New York v. Facebook, Inc., Mr. Kades said that there is now a common view that refusals to deal "cover a broad range of conduct" and that Trinko "virtually immunizes refusals to deal from antitrust liability." Mr. Kades disputed this conclusion, drawing attention to a DOJ amicus brief that "explained errors in the Facebook court's decision," adding that Trinko is "far less than it appears."

In reviewing the Trinko decision, Mr. Kades stated that the refusals to deal were "highly context-specific" relating to the facts in that case. He explained that the specific rules for refusals to deal "do not apply to a range of conduct that arises in antitrust cases involving digital markets." He said that refusal to deal is limited to a company's decision not to deal with competitors, and that it does not apply to a company's dealing with customers nor a company’s dealing with competitors if conditioned upon the competitor refraining or limiting dealings with others.

Mr. Kades stated that if digital platforms invite and encourage connection to the platform to "increase the value of the platform," then there is no longer an unconditional refusal to deal. He asserted that even in such circumstances where a digital platform has unconditionally refused to deal with a competitor, the question remains "whether the digital platform has a purpose to create or maintain its monopoly."

Juxtaposing digital platforms with rail and phone networks of the 20th century, Mr. Kades said that digital platforms have "massive economies of scale" and that "interconnection is critical to success." He asserted that courts analyzing refusals to deal on digital platforms should consider those factors, as well as that the physical infrastructure is less costly and the cost of interconnection typically "falls on the party seeking it."