Ex-Ante and Ex-Post Control of Buyer Power

Posted by Social Science Research Network

Ex-Ante and Ex-Post Control of Buyer Power Stefan Thomas (Eberhard-Karls-University)

Abstract: This paper considers the effects of buyer power under the antitrust laws. It focuses on EU antitrust law, namely Article 102 TFEU and the EU Merger Control Regulation, while taking into account the stance of US antitrust law. Recent investigations of several European antitrust authorities in the grocery sector have expressed concerns that concentration on the demand side can result in market foreclosure or anticompetitive exploitation of market participants. Also, in the US there is an ongoing debate about the anticompetitive and procompetitive effects of buyer power, which is inter alia reflected in the landmark decision of the US Supreme Court in Weyerhaeuser and in the merger control policies of the DOJ and the FTC. Against this background, the present paper starts with the definition of buyer power. It underscores the necessity to distinguish between single price monopsony on the one hand and individual bargaining power on the other hand, since the economic effects of these two types of buyer power deviate significantly. In subsequent steps, the paper analyses different theories of harm that can be raised with respect to buyer power. It discusses the effects of buyer power on allocative efficiency, dynamic efficiency as well as consumer welfare and draws conclusions from that for the enforcement of the antitrust laws.