Anticompetitive Entrenchment

Abstract

Mounting public concern with the exercise of market power in concentrated markets demands a response. While modern antitrust emphasizes the prevention of market power over reaction to its exercise, it does contain one indirect but potentially important tool for addressing problems with already existing concentration and market power: the often-overlooked theory of resistance to anticompetitive entrenchment in merger enforcement. This article explores how traditional concerns with the entrenchment of market power might be updated and reintroduced to serve as a vehicle for addressing problematic markets in the modern antitrust framework. The article explains this theory of anticompetitive entrenchment, its limits, and appropriate conditions for its use, in the context of two specific applications: (1) tacit collusion among oligopolists, and (2) the exploitation of market power by a dominant firm in a protected position.

Keywords: entrenchment, antitrust, concentration, market power

JEL Classification: K21, L41