Beware Buyer Power

Abstract

The conventional antitrust wisdom is that buyer side market power or monopsony is so unusual and so rarely anticompetitive that it should not merit more than a scholarly afterthought. Moreover, these brief mentions typically say it is essentially the mirror image of seller power or that, while seller-side power is suspect since it leads to higher consumer prices, buyer-side power is usually benign, because the public should not care which layer of a distribution channel gets any potential savings that can arise. This short article discusses how buyer power can be anticompetitive. It also discusses how buyer power or monopsony power is not the reciprocal of seller power or monopoly power, and summarizes an American Antitrust Institute conference on the subject.

Keywords: antitrust, buyer power, monopsony, monopoly, consumer harm

JEL Classification: K21, L12