David Evans and Richard Schmalensee
This chapter provides a survey of the economics literature on multisided platforms with particular focus on competition policy issues, including market definition, mergers, monopolization, and coordinated behavior. It provides a survey of the general industrial organization theory of multisided platforms and then considers various issues concerning the application of antitrust analysis to multisided platform businesses. It shows that it is not possible to know whether standard economic models, often relied on for antitrust analysis, apply to multisided platforms without explicitly considering the existence of multiple customer groups with interdependent demand. It summarizes many theoretical and empirical papers that demonstrate that a number of results for single-sided firms, which are the focus of much of the applied antitrust economics literature, do not apply directly to multisided platforms.
D. Daniel Sokol and Rosa Abrantes-Metz
Both theoretical and empirical work in a number of different fields, including economics, accounting, finance, organizational theory, and sociology provides important insights indicating that a firm is not merely a single entity in its actions. Rather, a firm is made up of a number of various components, each of which has its own incentives that shape firm behavior. This chapter reviews both the antitrust and the non-antitrust literatures on compliance and corporate governance to provide a clearer picture of the extant literature and the theoretical and empirical gaps within the antitrust literature to better inform antitrust policy on detecting cartels. This chapter explores the scholarship both within and outside of antitrust to better understand internal detection of wrongdoing and improved compliance in the antitrust cartel context.
Keith N. Hylton
Since China has modeled its antitrust regime on that of the EU, there are essentially two antitrust regime types: the United States and the EU. This chapter is a brief comparative study of the two regimes. I focus on three categories in which fundamental differences are observed: enforcement, legal standards, and procedure. Within each of the three categories, I narrow the focus to a specific illustrative feature. With respect to enforcement, the EU imposes gain-based penalties, while the United States imposes harm-based penalties. In predation law, the United States has a marginal cost standard and the EU has an average cost standard. With respect to procedure, the United States is a common law system, while the EU’s procedure is closer to the civil law system in its allocation of power between the courts and the enforcement agency. These differences have profound implications for the welfare consequences of global antitrust enforcement.
Daniel L. Rubinfield
Antitrust litigation has been experiencing a growth spurt in the past several decades as the result of expanding public enforcement worldwide, active private enforcement in the United States, and initial forays into private enforcement in other areas of the world. Given the large costs to the parties flowing from antitrust trials, it is not surprising that a vast majority of both private and public enforcement actions are resolved through settlement. This essay sketches out the conceptual framework underlying the settlement-trial decision. It also describes some of the empirical evidence on the settlement of both public and private antitrust cases and in the process offers commentary on a number of important policy issues.
Daniel Spulber and Christopher Yoo
Network industries, including the Internet, have shown significant growth, substantial competition, and rapid innovation. This chapter examines antitrust policy towards network industries. The discussion considers the policy implications of various concepts in the economics of networks: natural monopoly, network economic effects, vertical exclusion, and dynamic efficiency. The analysis finds that antitrust policymakers should not presume that network industries are more subject to monopolization than other industries. Deregulation and the strength of competition in network industries have removed justifications for structural separation as a remedy. Also, the chapter argues that deregulation and competition have effectively eliminated support for application of the essential facilities doctrine. Antitrust policy in network industries should be guided by considerations of dynamic efficiency.
R. Preston McAfee, Michael Williams, and Kenneth Hendricks
This chapter surveys the theoretical and empirical literature on bid rigging in auctions. In particular, it reviews the theory and practice of bidding rings in one-shot auctions and in repeated auctions. The main theme is how the type of auction, whether it is first-price or second-price, sealed bid or oral, affects the incentive of bidders to collude and the way in which they collude.
Roger D. Blair and Jessica S. Haynes
This chapter explores Major League Baseball (MLB)'s antitrust exemption and its current relevance, starting by presenting a brief overview of the antitrust laws in the United States. Next, MLB's anomalous antitrust exemption and its vulnerability to Congressional action are explained, and it is argued that the antitrust exemption is largely irrelevant today. The anticompetitive pooling of broadcast rights is covered by the Sports Broadcasting Act, which shields such pooling from the antitrust laws. The exemption had an enormous financial impact for over fifty years as it protected and preserved MLB's monopsonistic reserve system, which meant that the club owners obtained nearly the entire surplus generated by the business of baseball. The agreements on other labor issues, namely player drafts, age restrictions, and roster size, are considered. There is still an extremely good reason for MLB to jealously guard its antitrust exemption.
Roger D. Blair and Christina DePasquale
This chapter examines the antitrust implications of bilateral monopoly. Section 16.2 presents the economic model of bilateral monopoly. This section compares monopoly, monopsony, and bilateral monopoly. In particular, it focuses on price, output, and social welfare. Section 16.3 examines some complications for antitrust policy. In particular, unlawful monopoly may lead to monopsony and unlawful monopsony may lead to monopoly. This has serious implications for antitrust policy in Section 1 Sherman Act cases and Section 7 Clayton Act cases, which are examined in section 16.4. The chapter closes with some concluding remarks in section 16.5.
Michael Mazzeo and Ryan McDevitt
Business strategy is fundamentally about firm decision-making. Antitrust policy and enforcement, in turn, evaluate the decisions made by firms and the market outcomes that result. To the extent that firms’ decisions will be scrutinized ex post, managers must understand how antitrust concerns might constrain their actions and, thus, suggest alternative optimal decisions. Owing to this importance, most business strategy courses broach the subject of antitrust, and managers frequently confer with antitrust attorneys when making important strategic decisions. Correspondingly, it is also useful for the antitrust community to understand how firms use the concepts and frameworks of business strategy to make the decisions that they will be evaluating. Business strategy maintains a holistic orientation, drawing on traditional functional areas such as operations, finance, accounting, and marketing to inform the firm’s overarching direction.
Dennis Carlton, Mark Israel, and Mary Coleman
Merger analysis has generally developed with a focus on mergers among sellers and whether a merger will create or enhance seller market power. The issue of buyer power, however, can be important in many merger cases. First, some mergers will combine two significant purchasers of a product or service. In such cases, the competitive analysis of the merger for those products or services assesses (1) whether the merger creates or enhances buyer power sufficiently to raise competitive concerns, and (2) whether competitive concerns are offset due to efficiencies resulting from the combination. Second, some seller mergers involve markets where customers have some level of buyer power. In such cases, part of the competitive assessment of the merger may be to determine whether the presence of buyer power will constrain the potential exercise of seller market power following the proposed merger. This chapter addresses both issues.