Conceptual Foundations of Antitrust Law; Follow-up

Posted by Hanno Kaiser on Monday, February 27th 2006 at 3:02 pm under Antitrust, Law and Economics.

Following up on my previous posts about the conceptual foundations of antitrust law (here and here), the chart below illustrates the relationship between the ultimate goal of economic policy (consumer welfare), the primary means of achieving it (free markets, competition), and the mission of the antitrust laws (prohibiting conduct having significant anticompetitive effects) as a policy tool for promoting competition and therefore consumer welfare. Moreover, the chart depicts the two most important proxies for anticompetitive conduct, market power (the ability and the incentive to raise prices) and market concentration (e.g., HHI measures), as well as the evidence typically introduced in proving anticompetitive effects directly or circumstantially by establishing the factual predicates for one of the two proxies.

Against this backdrop, it is apparent that much of the traditional merger analysis involves the least direct evidence of anticompetitive effects. Delineating markets, identifying market participants, and computing market shares all contribute to establishing a market concentration measure. That measure, in turn, permits the inference of market power (Step 1). Market power permits the inference of anticompetitive effects (Step 2). The diminution of competition, finally, permits the inference of a consumer welfare loss (Step 3).

Technorati Tags: antitrust, inference, competitive effects, consumer welfare, economic policy

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2 Responses to “Conceptual Foundations of Antitrust Law; Follow-up”

1. Antitrust Review » Josh Wright on Independent Ink and Price Discrimination Says:
   March 2nd, 2006 at 10:19 am

   [...] I am conflicted on the issue of price discrimination, because price discrimination is direct evidence for the existence of market power. The problem is, of course, that the inference from market power to anticompetitive effects does not always hold true. In fact, in differentiated product markets, that inference is lilkely to be highly unreliable, because product differentiation in itself is an exercise in gaining market power, yet product differentiation provides us with greater product variety, which should properly be counted as promoting consumer welfare.Technorati Tags: antitrust, Independent Ink, price discrimination, consumer welfare You can also bookmark this on del.icio.us or check the cosmos [...]

2. Antitrust Review » Volvo v. Reeder: “Conservative Activism” at the Supreme Court? Says:
   August 1st, 2006 at 8:37 pm

   [...] One minor point. It is often said that “the explicit goal of the Robinson-Patman Act [is] to protect inefficient competitors from elimination,” which brings the Act into conflict with the promotion of allocative and productive efficiencies that are commonly identified as the unifying goals of antitrust. That view, however, is not universally shared. While the legislative history clearly shows that the Act was intended to protect small businesses from chain stores, there is also ample evidence that only equally efficient disfavored purchasers should be protected from price discrimination. That doesn’t cure the many ills of the Robinson-Patman Act, but it goes a long way toward harmonizing the Act with the goals of antitrust as we understand them today. Andrew Gavil provides an excellent summary of the legislative history supporting the “equally efficient” reading in Secondary Line Price Discrimination and the Fate of Morton Salt: To Save it Let it Go, 48 Emroy L.J. 1057 (1999).Technorati Tags: antitrust, Robinson-Patman You can also bookmark this on del.icio.us or check the cosmos [...]

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