Antitrust Economics for Lawyers
Antitrust Economics for Lawyers
Antitrust Economics for Lawyers, published by LexisNexis and written by CRA consultants and affiliated experts, is geared towards attorneys in antitrust practice. The book provides lawyers, partners, and associates with clearly explained economic concepts and discusses several important topics in antitrust economics. The topics are organized into three main areas: merger analysis, monopoly and exclusion, and damages cases.
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Chapter 1—Market Definition and Multi-Product Firms in Merger Analysis
Serge Moresi, Steven C. Salop, John R. Woodbury
The authors explain the “hypothetical monopolist test,” the standard methodology for identifying relevant antitrust markets in merger cases, and discuss two approaches to implementing the test. They focus on the implementation of the test when firms offer multiple products or services, either inside or outside the candidate market, and discuss the “hypothetical cartel test” introduced in the 2010 US Merger Guidelines.
Chapter 2—Unilateral Effects of Horizontal Mergers
The author explains why gross margins and diversion ratios are crucial for understanding the economic principles that underlie the unilateral effects of horizontal mergers involving differentiated products, and for quantifying these unilateral effects.
Chapter 3—Coordinated Effects in Merger Analysis
Andrew R. Dick
Concern about coordinated effects has played a central role in US merger enforcement policy for more than 30 years. The author uses case examples to discuss the economic factors that influence the theory of collusion. He also explains how economists apply organizing principles to analyze proposed mergers, using examples drawn from mergers that were ultimately challenged by the DOJ or the FTC.
Chapter 4 - The Economics of Monopsony
The author explores how a company with monopsony power will generally be able to purchase inputs at lower prices, but will not typically pass on lower input costs to its own customers in the form of lower final good prices. From the producer’s perspective, the harm from monopsony is often obvious and intuitive. With fewer and more powerful buyers for their products, producers cannot ﬁnd buyers for everything they would like to produce and, as a result, they are “forced” to take lower prices. However, from the perspective of the economy as a whole (including retailers and consumers), is monopsony with its lower prices really harmful?
Chapter 5 - Analyzing Merger Effects on Input Prices When Prices Are Negotiated
In this chapter, the author explores factors to be considered when analyzing the effects of mergers on input prices in markets where prices are negotiated bilaterally. It is frequently suggested that if a merger consolidates the purchases of a given input, then the merged firm will have greater “clout” and should be able to negotiate for lower prices. This chapter explains that while this expectation can be correct, it is not necessarily correct in all circumstances. The chapter also considers the possibility that a negotiated reduction in input prices may reduce the merged firm’s marginal costs, thereby allowing it to compete more effectively on downstream markets, in the process putting downward pressure on the prices paid by customers.
In this chapter, the authors survey the economic principles underlying distribution arrangements between upstream firms (manufacturers) and downstream firms (such as wholesalers, dealers, or retailers). The focus is on the potential procompetitive and anticompetitive effects from vertical restraints, such as exclusive dealing, loyalty discounts, and most-favored nation clauses. The discussion applies generally to franchisor-franchisee relationships as well. All of the effects identified by economic theory have implications for how the antitrust laws treat the distribution or franchise arrangements, particularly given most of these arrangements are analyzed under a rule of reason.
Chapter 7—Distinguishing Between Market Power and Monopoly Power in a Section 2 Exclusion Case
In this chapter, the author explains the economic notion of monopoly power and compares that to the legal concept of monopoly power with the goal of helping lawyers better understand how to address the issue of monopoly power in an exclusion case.
The author discusses bundling in the context of anticompetitive conduct; whether bundles, in which distinct products are packaged together at a discounted price relative to what each would cost on an à la carte basis, can ever be used as an exclusionary mechanism. If so, how can exclusionary uses of bundled discounts be distinguished from the kinds of pervasive, procompetitive bundling observed in many markets?
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Chapter 9—Contracts That Reference Rivals
Fiona Scott Morton
In this chapter, the author focuses on contracts that reference rivals (CRRs), such as most-favored-nation provisions (MFNs), and provides a brief survey of past and current CRR cases, as well as the findings in economic literature. CRRs have been and will likely remain to be the subject of antitrust scrutiny in government and private litigation as seen in the recent Apple e-books case.
Chapter 10—Estimating Damages in Collusion Cases
Timothy S. Snail
In this chapter, the author discusses the different approaches to damages estimation that are routinely used by experts—plaintiff and defendant experts—in collusion cases. It discusses the potential economic effects of collusion, considerations in building the theoretical model for the damages analysis, data and evidence requirements, methods for estimating damages from collusion using econometric methods, and the validation of results from damages models.