Abstract

http://ssrn.com/abstract=2145455
 


 



Moving Beyond Naïve Foreclosure Analysis


Joshua D. Wright


Federal Trade Commission; George Mason University School of Law

September 12, 2012

George Mason Law Review, Vol. 19, No. 5, Summer 2012, pp. 1163-1198
George Mason Law & Economics Research Paper No. 12-61

Abstract:     
Over the past several decades, antitrust law has shifted from predation to exclusion as the predominant competitive risk associated with single-firm conduct. This shift is attributable to the rise of Raising Rivals’ Costs (“RRC”) as the modern economic paradigm for understanding the potential anticompetitive concerns associated with exclusionary contracts. Courts in exclusion cases have long analyzed the extent to which a defendant’s distribution contracts foreclose rivals from a critical input by calculating the percentage of the input market contractually committed to the defendant and therefore presumptively foreclosed from rival suppliers. I describe this measure as the “naïve foreclosure” rate. RRC provided a more economically sophisticated approach to assessing the competitive risks associated with exclusion, while also embracing possible efficiencies of such arrangements. However, while RRC replaced the discredited foreclosure theories within economics, the naïve foreclosure requirement embraced by the law has barely changed over the last half century. What is left is a mismatch between new economic theories and obsolete doctrine. The primary purpose of this Article is to highlight this conflict and its importance and to propose the beginnings of a solution consistent with the modern approach focusing upon identifying the direct competitive impact of the restraint rather than unreliable proxies detached from economic theory. This Article proposes abandonment of the naïve foreclosure measure in favor of a “but-for foreclosure” approach that assesses the net impact of the restraint at issue and isolates out other factors influencing the availability of distribution to rivals.

Number of Pages in PDF File: 37

Keywords: Clayton, DOJ, Department of Justice, exclusive dealing, International Salt Co. v. United States, minimum efficient scale, monopolization, Nashville Coal, Robert Bork, Section 2, share discounts, shelf space agreements, Sherman Act, Standard Oil, Steven Salop, Tampa Electric, Thomas Krattenmaker

JEL Classification: D42, D43, K21, K23, L12, L41, L42, L43

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Date posted: September 12, 2012  

Suggested Citation

Wright, Joshua D., Moving Beyond Naïve Foreclosure Analysis (September 12, 2012). George Mason Law Review, Vol. 19, No. 5, Summer 2012, pp. 1163-1198; George Mason Law & Economics Research Paper No. 12-61. Available at SSRN: http://ssrn.com/abstract=2145455

Contact Information

Joshua D. Wright (Contact Author)
Federal Trade Commission ( email )
601 New Jersey Ave., NW
Washington, DC 20580
United States
George Mason University School of Law ( email )
3301 Fairfax Drive
Arlington, VA 22201
United States
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