The Necessity in Antitrust Law
67 Pages Posted: 9 Apr 2021 Last revised: 24 Feb 2022
Date Written: April 4, 2021
Antitrust rarely, if ever, gives primacy to a dispute’s subject matter. For instance, exclusionary conduct that raises the price of a lifesaving drug receives the same analysis as a restraint of baseball cards. Since antitrust’s purpose is to promote consumer welfare, the equal treatment of important and mundane goods might appear perplexing. After all, competition to produce affordable foods, medicines, and other necessities would seem to foster consumer welfare more than inane products do.
In fact, defendants generally win antitrust lawsuits even when monopolizing necessities because the primary method of antitrust review is notably deferential to defendants. To explain this landscape, the high prices available in a monopoly should incentivize rivals to enter the market, creating competition and correcting the market. Additionally, people may presumably mitigate high prices by buying a lesser substitute or nothing at all. Since courts apply the same level of deference regardless of the market’s importance, a defendant who cites an efficiency gained from excluding competition can typically survive antitrust scrutiny.
This Article argues that core pillars of antitrust make little sense with necessities. An exclusionary act in an essential market extracts an added premium reflecting society’s vulnerability, making the costs of market power much greater than with mundane goods. The effect is that antitrust courts have systematically underestimated the costs of monopolies and trade restraints in essential markets, causing them to misidentify anticompetitive acts as procompetitive. Indeed, whereas
antitrust assumes that consumers enjoy options when faced with monopoly pricing, people who need a necessity such as a life-saving drug will pay the high prices so long as they can. The implications are many. First, a larger spectrum of consumers must pay the monopoly rates. Second, whereas a cartel of artisan belt makers may only charge so much before consumers purchase mass-produced belts, a monopolist can demand a greater premium without losing consumers. Third, this landscape incentivizes collusion since firms can extract more money from
more people. Fourth, anticompetitive conduct is more likely to harm marginalized groups who suffer higher switching costs (for example, self-medication over expensive pharmaceuticals) or even complete deprivations of necessities. This Article argues that the concepts of essentialness and inelasticity must be integrated into the substantive analysis of whether conduct is anticompetitive. It provides a logical framework to do so using a seldom employed approach called the “quick look,” which would flip the burden onto the defendant and thereby strip the typical analysis of its deference in essential markets. In fact, since confusion over when the quick look is proper has made it a rarity—despite widespread support for its usage—this Article’s approach would establish an effective place for the test. Also, recognizing the greater level of harm inflicted on especially marginalized populations, the proposal would enhance welfare by beginning to disaggregate the term “consumers.”
Keywords: Antitrust, Essentials, Necessities, critical race theory, discrimination, inelastic demand, anticompetitive
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