Should "price Squeeze" be a recognized form of anticompetitive conduct?

Journal of Competition Law and Economics

Volumn 4, Issue 2, 2008, Pages 271-278

  Carlton, Dennis W ^a  

^a UNIVERSITY OF CHICAGO   (United States)

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EID: 50449109362     PISSN: 17446414     EISSN: 17446422     Source Type: Journal    
DOI: 10.1093/joclec/nhn012     Document Type: Article

References (14)

1. 503 F.3d 876 (9th Cir. 2007).
2. As I explain below, if there is competition in the sale of Product A and Firm 1 is a price taker in that market, then the price squeeze would occur only if Firm 1 depressed the price of Product B because Firm 1 could not raise the price of Product A. In that situation, the analysis would be identical to the analysis of predatory pricing in Product B and there is no need for a separate "price squeeze" theory of antitrust liability.
3. See, e.g., Dennis W. Carlton, A General Analysis of Exclusionary Conduct and Refusal to Deal - Why Aspen and Kodak are Misguided, 68 Antitrust L.J. 659 (2001)
4. Richard A. Epstein, Monopoly Dominance or Level Playing Field? The New Antitrust Paradox, 72 U. CHI. L. REV. 49 (2005)
5. Herbert Hovenkamp, Exclusion and the Sherman Act, 72 U. CHI. L. REV. 147 (2005).
6. See, e.g., Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993).
7. See id. at 224.
8. See, e.g., Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993).
9. See David S. Evans & Jorge Padilla, Designing Antitrust Rules for Assessing Unilateral Practices: A Neo-Chicago Approach, 72 U. CHI. L. REV. 73 (2005).
10. If Firm 1 was not as efficient as Firm 2 in the production of Product B, then Firm 1 would willingly deal with Firm 2 at prices under which Firm 2 makes profits.
11. I assume that the duty to deal is imposed under the antitrust laws. In Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP the Supreme Court spoke about the reluctance that courts have in imposing an antitrust duty to deal on a firm such as Firm 1. 540 U.S. 398 (2004). The reluctance stems from the weighing of the costs and benefits of such a duty.
12. See id. at 414. Although one can think of instances where a duty to deal may benefit consumers, a duty to deal reduces property rights and as such reduces the fundamental incentives of a capitalist system to reward those who create products that consumers want. Any reduction in this incentive will generally harm consumers, especially when one realizes how important new products have been in raising living standards.
13. See Carlton, supra note 2. I note that regulatory duties to deal are not relevant to this inquiry. If a regulator imposes a duty to deal, the regulator should also establish the terms of dealing.
14. See Trinko, 540 U.S. at 411-12.