South-Western Legal Studies in Business

3M's Exclusionary Practices Illegally Drove Competitor from Market
Description Appeals court upheld the conviction of 3M for monopolization of the transparent tape market. 3M used its monopoly position in that market to drive out a new competitor by engaging in exclusive dealing with customers and by offering rebates that were larger if customers did not buy competitor products.
Topic Antitrust
Key Words Monopolization; Sherman Act; Exclusionary Conduct; Exclusive Dealing
C A S E   S U M M A R Y
Facts 3M makes Scotch tape and dominates the market. At the time LePage’s decided to sell private-label transparent tape, 3M had about 90% of the tape market. LePage’s entry was successful as it sold 88% of the private-label tape by 1992, a small share of the entire tape market, but profitable for LePage’s. 3M entered the private-label tape market in the early 1990s. LePage’s claimed that 3M engaged in anticompetitive acts to drive LePage’s from the market, so that LePage suffered losses from 1996 through 1999. LePage’s sued, contending that 3M used its monopoly to injure LePage’s. 3M offered customers higher rebates when they bought products in a number of 3M’s product lines. 3M also encouraged customers to enter into exclusive dealing arrangements with 3M in violation of the Sherman Act. The jury held for LePage’s and awarded damages, which were trebled to $68.5 million. 3M appealed.

Affirmed. Exclusionary conduct of 3M, given its monopoly power, such as its rebates and exclusive dealing contracts, could violate the Sherman Act, even if 3M never priced its tape below its cost. Monopolization occurs if a firm engages in exclusionary or predatory conduct without a valid business justification. 3M’s actions were designed to achieve sole-source supplier status to enhance its monopoly position. The rebates offered by 3M when customers ordered all supplies from 3M were not related to cost savings by 3M due to fewer invoices and shipments. The design of the program was to eliminate the competitor.

Citation LePage’s Inc. v. 3M, 324 F.3d 141 (3rd Cir., 2003)

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