Personalized Pricing as Monopolization
63 Pages Posted: 23 May 2017 Last revised: 4 Sep 2019
Date Written: May 22, 2017
The advance of the information age will allow firms to engage in personalized pricing, a form of price discrimination that is profitable for firms, but unambiguously harmful to consumers. Antitrust can protect consumers from personalized pricing—also called perfect price discrimination—by condemning the steps firms must take to prevent resellers from undermining firms’ personalized pricing schemes. To personalize prices successfully, a firm must prevent those to whom the firm wishes to charge low prices from reselling the product to those to whom the firm wishes to charge high prices. Otherwise, resellers will compete away any difference in prices. But such steps amount to conduct that harms competitors—here, resellers—and ultimately the consumers who pay the personalized prices that result. A firm that personalizes prices must therefore do the three things that together constitute illegal monopolization under Section 2 of the Sherman Act: harm competition, and consumers, in order profitably to raise prices. The right to refuse to deal with competitors, which would normally exempt this conduct from antitrust scrutiny, does not apply to personalized pricing because an available remedy—an order prohibiting personalized pricing, but not forcing firms to sell to resellers—does not lead to the forced sharing and judicial price administration that the right to refuse to deal is meant to avoid.
Keywords: antitrust, price discrimination, Sherman Act, Section 2, monopolization, refusal to deal, arbitrage, resale, resale restrictions, Robinson-Patman Act, first-degree price discrimination, perfect price discrimination, monopoly, dominant firm, intrabrand, interbrand, differential pricing, big data
JEL Classification: K21, L40
Suggested Citation: Suggested Citation