Section 1 of the Sherman Act, and that Kodak monopolized and attempted to monopolize a service aftermarket in violation of Section 2 of the Act.
The Court considered whether Kodak’s high share of parts sales gave it the market power required to support a tying claim and whether Kodak could monopolize a market limited only to servicing its own brand of equipment. Kodak argued for a substantive legal rule that competition from other suppliers in a market for equipment precluded a finding of monopoly power in any associated aftermarket.[1] It further argued that it could not raise prices for aftermarket parts and service because such an increase would be offset by lost equipment sales as customers purchased equipment with more attractive service costs.[2]
The Court’s decision allowed the ISOs’ claims to go forward beyond summary judgment. The majority opinion allowed that an OEM in some instances could be a monopolist in aftermarkets relating to its own products. The Court rejected Kodak’s proposed rule, holding that, “[l]egal presumptions that rest on formalistic distinctions rather than actual market realities are generally disfavored in antitrust law.”[3] Rather, the Court stressed the need to examine the facts at issue in a case,[4] noting that Kodak’s service prices had risen and identifying several “lock-in” factors, including the cost of switching from Kodak equipment to a competing brand’s equipment and imperfect information about total system costs.[5] The dissent, however, noted that Kodak had changed its policy during the relevant period and argued the case would have been decided differently if the policy had remained the same during that time.[6]
Courts have generally interpreted Kodak in one of two related ways.[7] First, they have limited the Kodak holding to a situation where a manufacturer has changed a policy regarding the availability of aftermarket market parts after initial purchase by the consumer, injuring customers who (without notice) are locked in and thus cannot switch to the primary market product sold by a different OEM.[8] Second, courts have not analyzed aftermarkets independently from primary markets absent a compelling reason to do so, such as the ability to exercise market power in the aftermarket without fear of offsetting commercial consequences in the primary market.[9] Furthermore, some courts have found little room to impose antitrust liability for a unilateral refusal to deal when intellectual property rights such as patent or
- ↑ Id. at 465–66.
- ↑ Id.
- ↑ Id. at 466–67.
- ↑ Id.
- ↑ Id. at 472–80.
- ↑ Id. at 491–93 (Scalia, J., dissenting). The majority suggested that, had customers been aware of Kodak’s policy prior to their purchases, a question of fact, it might have decided the case differently. See id. at 477 note 24.
- ↑ See generally United States, Roundtable on “Competition in Aftermarkets—Note from the United States,” Submission to OECD Competition Committee 7–10 (DAF/COMP/WD(2017)38), https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-international-competition-fora/aftermarkets.pdf (collecting cases).
- ↑ Alcatel USA, Inc. v. DGI Technologies, 166 F.3d 772 (5th Cir. 1999) (affirmed summary judgment for defendant as a matter of law where defendant did not change pricing, warranty, or other important terms after customers’ initial purchase decision).
- ↑ SMS Sys. Servs. v. Digital Equip., 188 F.3d 11 (1st Cir. 1999) (competition in the original market disciplined aftermarket pricing).
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