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Powerful Buyers and Merger Enforcement

76 Pages Posted: 16 Apr 2011 Last revised: 7 Feb 2013

John B. Kirkwood

Seattle University School of Law

Date Written: October 1, 2012

Abstract

Although large buyers like Walmart and Tyson Foods occupy important positions in the American economy, antitrust law remains focused on the conduct of sellers. Moreover, when mergers of buyers have been challenged, the cases have been based on a single theory – that the merger would create a dominant buyer (or group of buyers) that would exploit small, powerless suppliers. Most powerful buyers, however, face suppliers with power of their own, and in such cases, the buyers exert “countervailing power,” which can also be anticompetitive. Yet buyer mergers that reduce competition through the exercise of countervailing power are not addressed by the government’s guidelines, the leading treatises, or the case law.

This article provides a comprehensive analysis of the role of buyer power in merger enforcement. It defines the types of buyer power, describes their competitive effects, and reviews an array of evidence. It also discusses the traditional approach to buyer mergers, suggesting modifications to better reflect the true dynamics of buyer power. Most important, it recommends that courts and enforcement agencies halt mergers that enhance anticompetitive countervailing power. Because many buyer combinations that increase such power are beneficial, the article identifies ten situations in which a merger that augments countervailing power would reduce competition and diminish the welfare of consumers, suppliers, or society.

Keywords: antitrust, competition, merger, buyer, buyer power, monopsony power, countervailing power, bilateral monopoly, exclusionary conduct, raising rivals' costs, waterbed effect, consumer choice

Suggested Citation

Kirkwood, John B., Powerful Buyers and Merger Enforcement (October 1, 2012). 92 Boston University Law Review 1485 (2012); Seattle University School of Law Research Paper No. 13-04. Available at SSRN: https://ssrn.com/abstract=1809985 or http://dx.doi.org/10.2139/ssrn.1809985

John B. Kirkwood (Contact Author)

Seattle University School of Law ( email )

901 12th Avenue, Sullivan Hall
P.O. Box 222000
Seattle, WA n/a 98122-1090
United States

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