The Antitrust Duty to Charge Low Prices
40 Pages Posted: 1 Mar 2017 Last revised: 18 Jul 2018
Date Written: February 27, 2017
Over the past forty years, antitrust has come to embrace a goal of consumer welfare maximization that cannot be achieved solely through condemnation of collusive or exclusionary conduct. To address cases in which firms achieve the power to raise prices and harm consumers without engaging in collusive or exclusionary conduct, antitrust should impose a general duty on businesses to charge a price no higher than economic cost. Courts would not need to set prices to enforce this duty, because violations would be punishable only by nominal damages, and shame, rather than by an injunction setting a reasonable price. Although the effect of this duty on prices and consumer welfare is likely to be modest, the nonlinear relationship between price and total welfare suggests that a substantial improvement in total welfare could result.
Keywords: antitrust, excessive pricing, price regulation, monopoly, Sherman Act, Section 2, high prices, drug prices, shaming, nominal damages, social pricing, reasonable prices, price setting, consumer welfare, total welfare, efficiency, refusal to deal, conduct requirement, price gouging, dominant firm
JEL Classification: K21, L40
Suggested Citation: Suggested Citation