Competing Refusal-To-Deal Tests At 7th, 9th Circs.
“[U]nilateral refusals to deal are almost always lawful”— said then U.S. Circuit Judge Neil Gorsuch on behalf of the U.S. Court of Appeals for the Tenth Circuit in Novell Inc. v. Microsoft Corp. The Tenth Circuit followed Verizon Commications Inc. v. Law Offices of Curtis V. Trinko LLP, narrowly construed Aspen Skiing Co. v. Aspen Highlands Skiing Corp., and set up a rigid irrationality requirement requiring as a first step that a refusal to deal plaintiff show that a monopolist lost overall profits as a result of its conduct.
Judge Gorsuch concluded that “[c]ases that meet the profit sacrifice test represent a ‘limited exception’” to the general rule that refusals to deal are lawful. Novell remains the most important, and most defendant-friendly, refusal-to-deal case since Trinko.
A U.S. Department of Justice brief in a pending U.S. Court of Appeals for the Seventh Circuit case (Viamedia Inc. v. Comcast Corp.) is pushing for a Novell-like standard to become further entrenched as the de facto law of the land regarding refusals to deal.
The U.S. Supreme Court in Trinko said that Aspen Skiing is “at or near the boundary of Section 2 liability.” Novell then precisely and narrowly defined those boundaries in the Tenth Circuit. The DOJ is pushing for the Seventh Circuit to draw similar boundaries. At the same time, the DOJ has also filed a brief in a pending U.S. Court of Appeals for the Ninth Circuit case (Federal Trade Commission v. Qualcomm Inc.) in which it also has — in opposition to the FTC’s position — pushed for a strict refusal to deal standard. These fights could lead the Supreme Court to clarify the appropriate standard for refusal to deal claims.