It is a fundamental tenet of American capitalism that businesses seek to grow and corner a market in an industry. However, there is a fine line between successfully dominating a trade and running afoul of the Sherman Act, which prohibits attempts to monopolize trade or commerce among the states.

A recent case that helps define the scope of the Sherman Act is Xerox Corporation v. Media Sciences, Inc., in the United States District Court in the Southern District of New York. In that case, Media Sciences claimed Xerox is monopolizing the after-market manufacturing of ink sticks for printers, is engaging in anti-competitive behavior, and is fixing prices to exploit consumers. In ruling on a motion for summary judgment filed by Xerox, the court analyzed monopolization based on several criteria, including whether Xerox has the power to control prices and exclude competition, whether it engaged in predatory or anticompetitive conduct, and whether it has a specific intent to monopolize or a dangerous probability of achieving a monopoly. The court noted that an after-market analysis further requires a court to consider whether consumers who have already purchased a defendant’s product are locked in by the high costs and whether the company is exploiting customers.

The court determined that Xerox did not take advantage of its consumers by fixing the price at a supracompetitive rate, and it dismissed the anti-trust action. The court’s analysis shed light on the importance of pricing of products in which there are few, if any, alternatives in the market. Companies with a significant market share in an industry should consult regularly with counsel to ensure their business model and practices do not conflict with existing anti-trust law.

Posted by Mariqus Alexander at 11/18/2009 11:06:33 AM