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Volumn 68, Issue 3, 2001, Pages 1007-1022

The significance of variety in antitrust analysis

(1)  Leary, Thomas B a  

a NONE

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EID: 0035578433     PISSN: 00036056     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper
Times cited : (12)

References (50)
  • 3
    • 0347375972 scopus 로고    scopus 로고
    • note
    • This essay focuses on "variety" rather than "quality" because some of the relevant factors for consumers cannot fairly be characterized as quality differences. It will be apparent, however, that there is considerable overlap between the terms and that even "quality" is by no means a simple concept that can be objectively quantified.
  • 4
    • 21844482528 scopus 로고
    • Market Definition and Differentiated Products: The Need for a Workable Standard
    • See, e.g., James A. Keyte, Market Definition and Differentiated Products: The Need for a Workable Standard, 63 ANTITRUST L.J. 697 (1995).
    • (1995) Antitrust L.J. , vol.63 , pp. 697
    • Keyte, J.A.1
  • 7
    • 0003534211 scopus 로고    scopus 로고
    • ROBERT S. PINDYCK & DANIEL L. RUBINFELD, MICROECONOMICS 438 (4th ed. 1998). (Daniel Rubinfeld is a former Deputy Assistant Attorney General for Economic Analysis at the Antitrust Division of the Department of Justice.)
    • (1998) Microeconomics 4th Ed. , pp. 438
    • Pindyck, R.S.1    Rubinfeld, D.L.2
  • 8
    • 0004010763 scopus 로고
    • ¶ 409
    • 2A PHILLIP AREEDA ET AL., ANTITRUST LAW ¶ 409, at 43-44 (1995).
    • (1995) Antitrust Law , pp. 43-44
    • Areeda, P.1
  • 9
    • 0000448037 scopus 로고
    • Monopolistic Competition and Optimum Product Diversity
    • See, e.g., Avinash K. Dixit & Joseph E. Stiglitz, Monopolistic Competition and Optimum Product Diversity, 67 AM. ECON. REV. 297 (1977); Michael Spence, Product Differentiation and Welfare, 66 AM. ECON. REV. 407 (1976).
    • (1977) Am. Econ. Rev. , vol.67 , pp. 297
    • Dixit, A.K.1    Stiglitz, J.E.2
  • 10
    • 0001144631 scopus 로고
    • Product Differentiation and Welfare
    • See, e.g., Avinash K. Dixit & Joseph E. Stiglitz, Monopolistic Competition and Optimum Product Diversity, 67 AM. ECON. REV. 297 (1977); Michael Spence, Product Differentiation and Welfare, 66 AM. ECON. REV. 407 (1976).
    • (1976) Am. Econ. Rev. , vol.66 , pp. 407
    • Spence, M.1
  • 11
    • 0000123415 scopus 로고
    • Equilibrium with Product Differentiation
    • See, e.g., Jeffrey M. Perloff & Steven C. Salop, Equilibrium with Product Differentiation, 52 REV. ECON. STUD. 1207 (1985); Oliver D. Hart, Monopolistic Competition in the Spirit of Chamberlin: Special Results, 95 ECON. J. 889 (1985).
    • (1985) Rev. Econ. Stud. , vol.52 , pp. 1207
    • Perloff, J.M.1    Salop, S.C.2
  • 12
    • 0001876855 scopus 로고
    • Monopolistic Competition in the Spirit of Chamberlin: Special Results
    • See, e.g., Jeffrey M. Perloff & Steven C. Salop, Equilibrium with Product Differentiation, 52 REV. ECON. STUD. 1207 (1985); Oliver D. Hart, Monopolistic Competition in the Spirit of Chamberlin: Special Results, 95 ECON. J. 889 (1985).
    • (1985) Econ. J. , vol.95 , pp. 889
    • Hart, O.D.1
  • 13
  • 14
    • 0001549798 scopus 로고
    • Monopolistic Competition with Outside Goods
    • See, e.g., KELVIN LANCASTER, VARIETY, EQUITY AND EFFICIENCY (1979); Steven C. Salop, Monopolistic Competition with Outside Goods, 10 BELL J. ECON. 141 (1979).
    • (1979) Bell J. Econ. , vol.10 , pp. 141
    • Salop, S.C.1
  • 15
    • 70350116353 scopus 로고
    • Product Differentiation
    • Richard Schmalensee & Robert D. Willig eds.
    • See B. Curtis Eaton & Richard G. Lipsey, Product Differentiation, in 1 HANDBOOK OF INDUSTRIAL ORGANIZATION 723, 759-61 (Richard Schmalensee & Robert D. Willig eds., 1989).
    • (1989) Handbook of Industrial Organization , vol.1 , pp. 723
    • Curtis Eaton, B.1    Lipsey, R.G.2
  • 16
    • 0346745585 scopus 로고    scopus 로고
    • note
    • See, e.g., Eastman Kodak Co. v. Image Technical Servs., 504 U.S. 451 (1992) (a single company's branded products can be a relevant market); Brown Shoe Co. v. United States, 370 U.S. 294 (1962) (relevant markets are men's, women's, and children's shoes, but no further divisions based on price or quality); United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956) (relevant market either cellophane or all flexible packaging material); New York v. Kraft Gen. Foods, Inc., 926 F. Supp. 321, 333 (S.D.N.Y. 1995) (ready-to-eat "cereals are so highly differentiated, and compete with one another along so many different dimensions, that there is no clear break in the chain of substitutes among cereals that would permit definition of a market smaller than all [ready-to-eat] cereals").
  • 17
    • 0348006319 scopus 로고    scopus 로고
    • E.g., United States v. General Elec. Co., 1962 Trade Cas. (CCH) ¶ 70,488 (E.D. Pa. 1962) (consent judgment); United States v. Westinghouse Elec. Corp., 1962 Trade Cas. (CCH) ¶ 70,487 (E.D. Pa. 1962) (consentjudgment)
    • E.g., United States v. General Elec. Co., 1962 Trade Cas. (CCH) ¶ 70,488 (E.D. Pa. 1962) (consent judgment); United States v. Westinghouse Elec. Corp., 1962 Trade Cas. (CCH) ¶ 70,487 (E.D. Pa. 1962) (consentjudgment).
  • 18
    • 0346745584 scopus 로고    scopus 로고
    • note
    • Compare the quality adjustments to various price indices. The automotive component of the Producer Price Index, for example, modifies changes in selling prices to reflect the mandated changes (and product heterogeneity) in cars for safety and environmental features over time. U.S. BUREAU OF LABOR STATISTICS, HANDBOOK OF METHODS ch.
  • 19
    • 0346114942 scopus 로고    scopus 로고
    • (1997) (cost of mandated equipment subtracted from nominal price increase). The adjustment attempts to interject uniformity (and product homogeneity) in the calculation of prices and costs
    • (1997) (cost of mandated equipment subtracted from nominal price increase). The adjustment attempts to interject uniformity (and product homogeneity) in the calculation of prices and costs.
  • 20
    • 0348006318 scopus 로고    scopus 로고
    • Cf. United States v. Gillette Co., 828 F. Supp. 78, 83 (D.D.C. 1993) ("premium" writing instruments are still in a separate market, even though they are discounted)
    • Cf. United States v. Gillette Co., 828 F. Supp. 78, 83 (D.D.C. 1993) ("premium" writing instruments are still in a separate market, even though they are discounted).
  • 21
    • 0346114974 scopus 로고    scopus 로고
    • note
    • It has been suggested that these "prestige" products are an exception to the normal laws of economics and have upward-sloping demand curves because consumers seemed to be attracted by the premium prices. This analysis not only ignores the possibility that consumers may interpret the premium price as a signal of quality, but also the fact that they may derive added satisfaction from showing off their expensive acquisitions. Consumers buy a bundle comprised of the product and the prestige. The demand curve is still downward-sloping; more people will buy a prestige product if they can get it at a (preferably secret) discount.
  • 22
    • 0346114973 scopus 로고    scopus 로고
    • 370 U.S. 294 (1962)
    • 370 U.S. 294 (1962).
  • 23
    • 0347375971 scopus 로고    scopus 로고
    • Id. at 325
    • Id. at 325.
  • 24
    • 0346114972 scopus 로고    scopus 로고
    • "Practical indicia" recognized by the Court included industry or public recognition of the submarket as a separate economic entity, the product's peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors. Id.
    • "Practical indicia" recognized by the Court included industry or public recognition of the submarket as a separate economic entity, the product's peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors. Id.
  • 25
    • 84937311517 scopus 로고
    • After Gillette: An Analysis of Premium Product Markets under the 1992 Merger Guidelines
    • Compare, e.g., In re Super Premium Ice Cream Distrib. Antitrust Litig., 691 F. Supp. 1262, 1268 (N.D. Cal. 1988) (rejecting premium ice cream market), aff'd mem., 895 F.2d 1417 (9th Cir. 1990); United States v. Jos. Schlitz Brewing Co., 253 F. Supp. 129, 134 (N.D. Cal.) (rejecting premium beer market), aff'd, 385 U.S. 37 (1966); Murrow Furniture Galleries, Inc. v. Thomasville Furniture Indus., 889 F.2d 524, 528 (4th Cir. 1989) (rejecting definition of name brand high-quality furniture market); Tasty Baking Co. v. Ralston Purina, Inc., 653 F. Supp. 1250, 1258 (E.D. Pa. 1987) (rejecting premium snack cake and pie market in favor of overall snack cake and pie market); Frank Saltz & Sons, Inc. v. Hart Schaffner & Marx, 1985-2 Trade Cas. (CCH) ¶ 66,768 (S.D.N.Y. 1985) (rejecting better quality suit market); Mesirow v. Pepperidge Farm, Inc., 1981-2 Trade Cas. (CCH) ¶ 64,292 (N.D. Cal. 1981) (rejecting premium cookie market), aff'd, 703 F.2d 339 (9th Cir. 1983) with A.G. Spalding & Bros., Inc. v. FTC, 301 F.2d 585, 601, 603 (3d Cir. 1962) (finding that high-priced athletic goods constitute a distinct market from low-priced athletic goods); United States v. Federal Co., 403 F. Supp. 161, 167 (W.D. Tenn. 1975) (private-label and premium branded flour are separate markets where premium brands sell for a higher price and a premium brand competitor made no effort to track private-label prices as it did with premium brand prices); Photovest Corp. v. Fotomat Corp., 606 F.2d 704, 713-14 (7th Cir. 1979) (drive-thru photo processing constitutes a separate market from other retail photo processing where distinct premium pricing and low cross-elasticity shown). For a review of the cases in this area, see Keyte, supra note 4; David J. Dadoun & Diana L. Dietrich, After Gillette: An Analysis of Premium Product Markets Under the 1992 Merger Guidelines, 17 HARV. J.L. & PUB. POL'Y 567 (1994).
    • (1994) Harv. J.L. & Pub. Pol'y , vol.17 , pp. 567
    • Dadoun, D.J.1    Dietrich, D.L.2
  • 26
    • 0348006317 scopus 로고    scopus 로고
    • note
    • For example, although some courts have found distinct product markets based on existing price level differentials with no further showing of low cross-elasticity required, see, e.g., Donald B. Rice Tire Co. v. Michelin Tire Corp., 483 F. Supp. 750, 755 (D. Md. 1980) ($30 price differential between radial and non-radial tires supported separate product markets), aff'd, 638 F.2d 15 (4th Cir. 1981) (per curiam); United States v. Black & Decker Mfg. Co., 430 F. Supp. 729, 739 (D. Md. 1976) (lightweight chain saws priced below $170 were a distinct submarket, notwithstanding absence of low cross-elasticity evidence), the more prevalent approach is to require evidence of low cross-elasticity in addition to price differentials. See, e.g., Nifty Foods Corp. v. Great Atl. amp; Pac. Tea Co., 614 F. 2d 832, 840 (2d Cir. 1980) (separate markets for private-label and branded waffles was not supported where low cross-elasticity was not shown); Beatrice Foods Co. v. FTC, 540 F.2d 303, 310 (7th Cir. 1976) (no separate product markets for do-it-yourself and professional paint brush items where evidence of distinct price groupings or low cross-elasticity between differently priced items was not shown); Avnet, Inc. v. FTC, 511 F.2d 70, 77 (7th Cir. 1975) (25-50% price differential between new and rebuilt part lines, combined with evidence of low cross-elasticity, supported finding of two distinct product markets). In cases involving products differentiated by price and quality along a continuum, cases consistently follow Brown Shoe's edict that where no determinable gap exists in the continuum, a meaningful submarket cannot be found. 370 U.S. at 326. See, e.g., In re Super Premium Ice Cream Distrib. Antitrust Litig., 691 F. Supp. at 1268; Pennsylvania v. Russell Stover Candies, Inc., 1993-1 Trade Cas. (CCH) ¶ 70,224, at 70,091 (E.D. Pa. 1993); Donald B. Rice Tire Co. v. Michelin Tire Corp., 483 F. Supp. at 755; United States v. Black & Decker Mfg. Co., 430 F. Supp. at 739. But cf. United States v. Gillette Co., 828 F. Supp. at 83.
  • 27
    • 0347375968 scopus 로고    scopus 로고
    • Unilateral effects may also exist for homogeneous products if there are locational advantages or the creation of a dominant firm
    • Unilateral effects may also exist for homogeneous products if there are locational advantages or the creation of a dominant firm.
  • 28
    • 0347375970 scopus 로고    scopus 로고
    • See, e.g., Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 55 (1977)
    • See, e.g., Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 55 (1977).
  • 29
    • 0347375938 scopus 로고    scopus 로고
    • See, e.g., National Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679 (1978). But see California Dental Ass'n v. FTC, 224 F.3d 942 (9th Cir. 2000) (a case where the outcome may have been heavily influenced by its procedural history), rev'g 128 F.3d 720 (9th Cir. 1997), aff'd in part, rev'd in part and remanded, 526 U.S. 756 (1999)
    • See, e.g., National Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679 (1978). But see California Dental Ass'n v. FTC, 224 F.3d 942 (9th Cir. 2000) (a case where the outcome may have been heavily influenced by its procedural history), rev'g 128 F.3d 720 (9th Cir. 1997), aff'd in part, rev'd in part and remanded, 526 U.S. 756 (1999).
  • 30
    • 0346114941 scopus 로고    scopus 로고
    • Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975)
    • Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975).
  • 31
    • 0348006288 scopus 로고    scopus 로고
    • note
    • There are numerous surveys that show lawyers are less respected today than they used to be. Of course, this may be because of a lot of reasons that have nothing to do with the fallout from Goldfarb, and public esteem is not the same thing as client satisfaction. But, it does give one pause.
  • 32
    • 0347375931 scopus 로고    scopus 로고
    • note
    • The line between "services" and "experiences" is blurred. At any restaurant, the decor and the service are part of the eating experience. In some restaurants, the service (e.g., fawning headwaiters) may be for some the most significant part. In dinner theaters or restaurants at Disney World, the food may be only an incidental part of the entertainment experience. The precise characterization does not matter; the point is that the appeal of the overall package can be a much more significant competitive variable than the price of the food.
  • 33
    • 0348006285 scopus 로고    scopus 로고
    • Id. at 112 (quoting Times-Picayune Publ'g Co. v. United States, 345 U.S. 594, 613 (1953))
    • Id. at 112 (quoting Times-Picayune Publ'g Co. v. United States, 345 U.S. 594, 613 (1953)).
  • 34
    • 21344497440 scopus 로고
    • Market Definition in Antitrust Litigation in the Sports and Entertainment Industries
    • Id. at 111-12; see also International Boxing Club v. United States, 358 U.S. 242, 249-52 (1959) (championship boxing events are a market separate from non-championship events because of greater revenue potential and higher television ratings). James L. Seal, Market Definition in Antitrust Litigation in the Sports and Entertainment Industries, 61 ANTITRUST L.J. 737 (1993), argues that appropriate market determinations depend on the nature of the claim asserted. For example, events that are unique from the perspective of consumers are not necessarily unique for advertisers.
    • (1993) Antitrust L.J. , vol.61 , pp. 737
    • Seal, J.L.1
  • 35
    • 0347375966 scopus 로고    scopus 로고
    • I was part of the defense team, in a very junior capacity
    • I was part of the defense team, in a very junior capacity.
  • 36
    • 0348006287 scopus 로고    scopus 로고
    • 326 U.S. 1 (1945)
    • 326 U.S. 1 (1945).
  • 37
    • 24844432822 scopus 로고    scopus 로고
    • Disney-Time Warner Cable Dispute Turns Many TV Screens Blank
    • May 2, 2000
    • Joe Flint, Disney-Time Warner Cable Dispute Turns Many TV Screens Blank, WALL ST. J., May 2, 2000, at B1.
    • Wall St. J.
    • Flint, J.1
  • 38
    • 0342435297 scopus 로고
    • Symposium: A Critical Appraisal of the "Innovation Market" Approach
    • The issue is somewhat analogous to consideration of possible effects on innovation, without regard to an individual invention. The question of whether it is meaningful to talk about "innovation markets" has been considered by others at length. See Symposium: A Critical Appraisal of the "Innovation Market" Approach, 64 ANTITRUST L.J. 1 (1995).
    • (1995) Antitrust L.J. , vol.64 , pp. 1
  • 39
    • 0348004190 scopus 로고    scopus 로고
    • The Three Types of Collusion: Fixing Prices, Rivals and Rules
    • See Robert H. Lande & Howard P. Marvel, The Three Types of Collusion: Fixing Prices, Rivals and Rules, 2000 WIS. L. REV. 941 (2000).
    • (2000) Wis. L. Rev. , vol.2000 , pp. 941
    • Lande, R.H.1    Marvel, H.P.2
  • 40
    • 84986840379 scopus 로고
    • Declining Prices and Optimality When Costs Follow an Experience Curve
    • See, e.g., James E. Hodder & Yael A. Ilan, Declining Prices and Optimality When Costs Follow an Experience Curve, 7 MANAGERIAL & DECISION ECON. 229 (1986); A. Michael Spence, The Learning Curve and Competition, 12 BELL J. ECON. 49 (1981).
    • (1986) Managerial & Decision Econ. , vol.7 , pp. 229
    • Hodder, J.E.1    Ilan, Y.A.2
  • 41
    • 84986840379 scopus 로고
    • The Learning Curve and Competition
    • See, e.g., James E. Hodder & Yael A. Ilan, Declining Prices and Optimality When Costs Follow an Experience Curve, 7 MANAGERIAL & DECISION ECON. 229 (1986); A. Michael Spence, The Learning Curve and Competition, 12 BELL J. ECON. 49 (1981).
    • (1981) Bell J. Econ. , vol.12 , pp. 49
    • Michael Spence, A.1
  • 42
    • 0346745583 scopus 로고    scopus 로고
    • A Guide to the Antitrust Economics of Networks
    • Spring
    • See, e.g., David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Systems Competition and Network Effects, 8 J. ECON. PERSP. 93 (1994).
    • (1996) Antitrust , pp. 36
    • Evans, D.S.1    Schmalensee, R.2
  • 43
    • 0002981164 scopus 로고
    • Systems Competition and Network Effects
    • See, e.g., David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Systems Competition and Network Effects, 8 J. ECON. PERSP. 93 (1994).
    • (1994) J. Econ. Persp. , vol.8 , pp. 93
    • Katz, M.L.1    Shapiro, C.2
  • 44
    • 0034395836 scopus 로고    scopus 로고
    • Freedom as the Core Value of Antitrust in the New Millennium
    • Thomas B. Leary, Freedom as the Core Value of Antitrust in the New Millennium, 68 ANTITRUST L.J. 545 (2000).
    • (2000) Antitrust L.J. , vol.68 , pp. 545
    • Leary, T.B.1
  • 45
    • 0347375967 scopus 로고    scopus 로고
    • note
    • Consideration of variety may be affected by the debate between those who believe the primary focus of antitrust should be on efficiency (total welfare) and those who would focus on consumer welfare. This debate is here merely noted, not elaborated on.
  • 46
    • 0347375941 scopus 로고    scopus 로고
    • Leary, supra note 38
    • Leary, supra note 38.
  • 47
    • 0346745565 scopus 로고    scopus 로고
    • U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines §§ 1.1, 1.2 (1992, revised 1997), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,104
    • U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines §§ 1.1, 1.2 (1992, revised 1997), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,104.
  • 48
    • 0347375969 scopus 로고    scopus 로고
    • note
    • It would be equally subjective to modify the 5-10 percent price test upward in an effort to address some of the market definition issues discussed in this essay.


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