In their excellent textbook, “Antitrust Law in Perspective,” Gavil, Kovacic, and Baker introduce the distinction between collusive and exclusionary effects as the main ordering principle for antitrust offenses under §§1, 2 and §7. Collusive effects directly impair markets, whereas exclusionary conduct affects markets indirectly by excluding a rival or hampering its ability to compete. This distinction is extremely useful. That said, it might be even more intuitive to focus on collusive and exclusionary conduct, because the ultimate effect of collusive and exclusionary conduct is the same: the perpetrator, alone or in concert with others, is able to raise prices and overcharge consumers.

Assuming that consumer welfare is the ultimate goal of antitrust, consumer/customer overcharge is antitrust’s primary and ultimate concern. How can a firm overcharge its customers?

• First, it can collude with (or acquire) competitors. In that case, and further assuming that the colluding firms do in fact have market power, the overcharge is a direct and unmediated result of the collusion.
• Second, the firm can knock out its rival, and after the rival’s departure from the market raise prices unilaterally or in concert with other remaining firms. This “one-two punch” strategy is exclusionary in nature, because the ultimate overcharge depends on the prior successful exclusion of the rival, whose presence in the market (as long as it lasts) protects the consumer.
• A third strategy, available to a firm with significant market power, would simply be to unilaterally raise prices without any exclusionary conduct. However, having and using monopoly power as such is not unlawful.

Closely related to the collusive/exclusionary conduct divide of the substantive antitrust laws is the issue of remedies. Focusing on civil remedies by private plaintiffs only, the question is who can sue for what? Given that the ultimate concern of the antitrust laws is consumer overcharge, it makes sense that as a rule the consumer, or the direct purchaser as the consumer’s proxy, can always sue, irrespective of whether he or she is injured directly by collusive or indirectly by exclusionary behavior. In addition, the excluded rival can also bring suit for lost profits, provided that the rival’s continued presence in the market is necessary to protect customers from being overcharged. It seems to me, that this is the conceptual connection between both lost profits and overcharges and injury to a competitor and injury to competition, that the antitrust injury requirement in §4 really tries to get at.

The connection between collusive and exclusionary effects, conduct, overcharges and lost profits is thus as follows:

• Collusive behavior directly leads to customer overcharges. Those overcharges represent the collusive effect. In collusive conduct cases, we are dealing with customer plaintiffs only.
• Exclusionary behavior indirectly leads to customer overcharges, by eliminating a rival whose presence protects customers from being overcharged. The elimination of the rival is the exclusionary effect. In exclusionary conduct cases we are dealing with two sets of plaintiffs: customers, complaining about overcharges and excluded rivals, complaining about lost profits.

These conceptual relationships are neatly encapsulated in the Brown Shoe (1962) catch-phrase that the antitrust laws “protect competition, not competitors.” What this means today is that

• competition requires the presence of a number of competitors; and
• competitors and their profits are never protected for their own sake. Competitors are protected only if their continued presence is essential for maintaining competition, that is, avoiding customer overcharges.

If there are 20 rivals which are equal in all respects, excluding one won’t impact competition and consumers won’t be overcharged as a result. But if there are only 3 rivals, the exclusion of one is highly likely to impact competition. In the latter case, the antitrust laws will protect the competitor in order to protect competition. Protecting lost profits is thus a strategic, intermediate, and conditional goal of the antitrust laws, to serve the ultimate goal of preventing consumer overcharges.

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