Exclusive Dealing: Substance And Process

Slide 1

Slide 2

• Both efficiency and anticompetitive effects/explanations are very possible
• On each side, analysis is subtle
  • Efficiency: for example, investment-incentive theory
  • Anticompetitive: for example, divide-and- conquer theory

Slide 3

• Segal/Whinston (Rand J. Econ. 2000)
• Relationship-specific investments are NOT an efficiency rationale for exclusivity
• Investments with spillover to customer-entrant deals MIGHT BE - it is very complex
  • Who invests, how it spills over, bias absent ED
• How well could one disentangle this?

Slide 4

• RRW-SW (Amer. Econ. Rev. 1991/2000) shows that such exclusion can (profitably and harmfully) work against end users
• Usually exclusive dealing is with firms who then compete to sell to end users
  • That can seriously affect buyer incentives

Slide 5

• Fumagalli and Motta (Amer. Econ. Rev.)
• Simpson and Wickelgren; Yong; Shaffer?
• Which is right and when?
  • My attempted diagnosis and their reaction
  • Presumably an intellectual resolution will emerge
  • How likely is one to be able to prove?

Slide 6

• (Bayesian thoughts)
• Role of presumptions and burdens of proof
• The two presumptions

Slide 7

• Laissez-faire: don't intervene unless reasonably sure intervention will help
• Competition: protect "competition" unless reasonably sure alternative is better

Slide 8

• Have drifted towards making "competition" simply mean "the good outcome"
  • Towards, not yet "to". Eyebrows, but not guffaws, at "pro-competitive monopoly"
• Law protects "competition," so tautologically that linguistic shift would be good if we knew all
• But di presumption in favor of competition then has no meaning!
  • Merger between major rivals must be proven to be "loss of competition"? [Philadelphia Bank... ]

Slide 9

• What if "laissez-faire" were redefined as "the good outcome"?
  • Explicating idea, not proposing policy
• Would redefine "intervention" as "bad intervention"
  • Opponents of intervention would have to prove how it is bad
  • Strict government rules would be "not necessarily intervention"
• Pretty stupid, huh?
  • Words should mean what they mean...

Slide 10

• The bad old days
• The good new days
• The not so good new days??!
• International perspective

Slide 11

• Good idea: intervene only if intervention benefits efficiency/consumers
• Maybe not such a good idea: only if can specifically prove that it would do so
• Benefits of competition
  • Concrete, predictable, provable price effects
  • Dark matter

Slide 12

• "Competition" means competition
• Competition usually serves efficiency and consumers, but that's a fact, not a definition
• Pretending it's a definition, while helpful in some ways, guts the crucial antitrust presumption

Slide 13

• Hard question
  • Part of motive to redefine as "good stuff
    • Exclusive dealing as example
  • But that has huge dangers, maybe coming to roost
• • Beyond the study of words...
  • Want laissez-faire presumption
  • Want pro-competition presumption too
  • What to do?