The Kodak Case, The First Principles Approach, And Antitrust At The Millennium
Steven C. Salop
Georgetown University Law Center
Antitrust Law Journal
This short paper prepared for the Antitrust Law Journal's Symposium on Antitrust at the Millennium examines the contribution to antitrust reasoning and law of the Supreme Court's Kodak opinion. The main focus of the article involves the first principles approach to antitrust analysis. In this approach, analysis is centered on the evaluation of the competitive effects of the conduct. Market power and market definition have a role, but their role is part of and in reference to the main analysis of the alleged anticompetitive conduct and its likely market effects. Market power and market definition are not analyzed in a vacuum or in a threshold test, divorced from the conduct and effects allegations. Instead, analysis focuses on competitive effects, in some sense, the effects on the conduct on changes in market power. In this approach, market power is the power profitably to raise or maintain price above the competitive benchmark price. The competitive benchmark is the price that would prevail in the absence of the alleged anticompetitive conduct. This benchmark price often differs from both the current price and the perfectly competitive price. By following this first principles approach, logic and consistency are maintained and analytic traps and factual errors can be avoided. These traps include the well-known Cellophane Trap, but also the Marginal Cost, Price-Up, Threshold Test and Unilateral SSNIP Traps that are defined and discussed in the article. In addition, useless quibbling about the proper relevant market also may be avoided.
JEL Classification: L51Accepted Paper Series
Date posted: October 4, 1999
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