Timothy Brennan, Dec 13, 2011
The continuing fire over how to assess the competitive effects of single-firm conduct received yet more gasoline in the wake of the U.S. Federal Trade Commission’s (FTC) settlement of its antitrust case against Intel. The key issue in the case was whether Intel’s offering of “loyalty” discounts and other benefits to computer makers that purchased all or most of their microprocessor chips from Intel created an incentive to limit purchases of chips from Intel’s rivals, primarily AMD. My purpose here is not to re-litigate the case or take a position on whether the outcome was supported by the evidence. Rather, it is to use the Intel case to illustrate how the law should examine exclusion cases to see whether any anticompetitive harms-increases in prices consumers pay-are likely.
Among other differences with my approach, the standard framework for analyzing exclusion cases treats buyers who sign exclusive dealing contracts, or arrangements that impose penalties for dealing with rivals, as victims of monopoly coercion. These views of exclusion as coercion, and buyers as victims, are shared by both proponents and critics of cases, as illustrated by Joshua Wright’s critique of the FTC’s Intel case.
Following a brief summary of my framework and a look at Wright’s critique, I conclude by suggesting seven reforms to the assessment of exclusion cases that should improve how to identify when anticompetitive effects are present, reduce attention on irrelevant or superfluous considerations, and promote remedies that recognize any efficiencies that exclusive dealing and other potentially exclusionary practices can create.