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Series: Antitrust in 60 Seconds

· September 11, 2018

The Antitrust in 60 Seconds series discusses key topics in the antitrust debate. Below is a list of our current posts in the series with a link to the complete article and a 60-second read for each.

Illinois Brick is a Supreme Court case that has come to represent the proposition that indirect purchasers are not directly injured, and are not able to recover damages caused by violations of antitrust laws.  This rule has received attention recently because it arose in Apple v. Pepper, presently before the Supreme Court.

A commonly used identifier for a merger is “vertical or “horizontal.” A horizontal merger is one between firms on the same level of a supply chain, or horizontal to each other, that could compete with each other. A vertical merger is one in which a company on one level of a supply chain buys a company on another. The type of merger is important for antitrust analysis.

“Two-sided markets” is a term of art that refers to multi-sided business models, which describe a business model with two or more markets that are related to each other. Multi-sided businesses are companies that have some part of their business operate by connecting different groups of customers.

Market definition is an important step in building an antitrust case or investigating a market for anticompetitive harms. The goal is to define a relevant market so that other things like concentration levels, market power, and market shares can be determined.

The essential facilities doctrine in the EU, like in the United States, is a remedy that tackles the abuse of market power by a firm that holds a dominant position and refuses to deal with its rivals foreclosing the markets.

The essential facilities doctrine is a “mandatory access remedy” that imposes a duty on a monopolist firm to deal with competitors by requiring “a monopolist to provide access to a ‘facility’ that the monopolist controls and that is deemed necessary for effective competition.”

A network effect occurs when the value of a good or service increases the more people use it. Think of smartphones: It’s easier to connect with friends when they are already on the service you are using, and it’s easier for developers to release a mobile app on an operating system that already has a lot of users.

Today’s debate over the need to reboot antitrust enforcement centers on the appropriateness of the consumer welfare standard that guides U.S. antitrust enforcement.  Although the modern U.S. Supreme Court consistently enforces the consumer welfare standard as the guiding principle for antitrust analysis, some observers do not necessarily see the consumer welfare standard as the solution for antitrust enforcement, and claim that other public interest considerations should factor into the antitrust analysis.

Recent commentary on competition law and policy might lead one to believe that size is all that matters in the competition policy sphere: big is bad; small is beautiful. However, an assessment of the evolution of modern competition law enforcement shows that size is just one element of a broader and more sophisticated analysis.

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.