Antitrust-Related Recent Developments: U.S. Supreme Court Declines to Revive Refusal to Deal Monopolization Suit Against Microsoft

On April 28, 2014, the United States Supreme Court reinforced the prevailing view that monopolists rarely, if ever, have a duty to assist rivals by denying cert. in Novell, Inc. v. Microsoft Corp. Novell claimed that Microsoft Corp. violated Section 2 of the Sherman Act, 15 U.S.C. § 2, by withholding certain aspects of its software from competing developers during its rollout of Windows 95. Microsoft’s deviation from its previous practice of providing such information allegedly delayed Novell’s release of its Windows 95 compatible applications.

Novell alleged that Microsoft intentionally altered its existing business practice of providing competitors with Windows technical information in order to monopolize the market for operations systems.1 To support its monopolization theory, Novell presented a memo from former Microsoft CEO Bill Gates, stating that the company should withhold certain code from competitors to gain market advantages for Microsoft Word. The district court held that this constituted insufficient factual evidence to show that Novell was harmed by Microsoft’s conduct, and that “it is well established that a monopolist generally has no duty to cooperate with its competitors.” Novell, Inc. v. Microsoft, 2012-2 Trade Cases P 77,979 (D. Utah 2012).

Novell appealed to the Tenth Circuit, which similarly opined that “the antitrust laws rarely impose on firms—even dominant firms—a duty to deal with their rivals.”  Novell, Inc. v. Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013).  The appellate court rejected Novell’s assertions that Microsoft’s refusal to continue its code-sharing practices established a monopolization claim. The Tenth Circuit held that in order to prevail on a refusal to deal claim, the plaintiff must demonstrate that the monopolist sacrificed a preexisting course of dealings that resulted in a short-term loss of profits for the monopolist, “showing that the monopolist’s refusal to deal was part of a larger anticompetitive enterprise, such as (again) seeking to drive a rival from the market or discipline it for daring to compete on price. Put simply, the monopolist’s conduct must be irrational but for its anticompetitive effect.” Id. at 1075.  Novell was unable to demonstrate that “Microsoft took any course other than seeking to maximize the company’s net profits in the short as well as long-run.” Id. at 1077.

The Tenth Circuit’s decision is consistent with the general trend rejecting efforts to require monopolists to help rival companies. A monopolization claim based on refusal to deal theory was accepted by the Supreme Court in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., where the Court held that three ski slope operators situated on the same mountain as a fourth competitor violated Section 2 of the Sherman Act by discontinuing an “all-Aspen” ski ticket and preventing the competitor from acquiring rival lift tickets to offer its own multi-mountain package. 472 U.S. 585 (1985). The decision has, however, proven to be the high water mark for refusal to deal liability, especially in light the Supreme Court’s subsequent decision in Verizon Communications Inc. v. Trinko, 540 U.S. 398 (2004), distinguishing Aspen Skiing.

Since Trinko, district courts have been very reluctant to find companies liable under a refusal to deal theory. The Supreme Court’s decision not to review Novell’s case against Microsoft reinforces the view expressed by the Court in Verizon that the Aspen Skiing refusal to deal standard exists “at or near the outer boundary of § 2 liability.” Id. at 409.

1 Novell originally, and more logically, claimed that Microsoft monopolized the market for Windows 95 applications, but that claim was rejected on statute of limitations grounds.  Novell then changed its theory to take advantage of the tolling of the statute of limitations for operating system monopolization claims by virtue of the then long-running Department of Justice case against Microsoft.

 

Topics:  Anti-Competitive, Microsoft, Novell, SCOTUS, Sherman Act

Published In: Antitrust & Trade Regulation Updates, Civil Procedure Updates, General Business Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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