Antitrust by Interior Means

in The Intersections between Competition Law and Corporate Law and Finance (Cambridge Univ. Press) (Forthcoming)

24 Pages Posted: 28 Sep 2021

See all articles by Ramsi Woodcock

Ramsi Woodcock

University of Kentucky College of Law

Date Written: September 25, 2021

Abstract

If a firm is a nexus of contracts, then it is just the sum of its counterparties. It follows that when a firm monopolizes a particular market and exploits its power to impose unfavorable terms on a counterparty, the firm necessarily exploits one counterparty for the benefit of another, because the additional profits the firm generates from the unfavorable terms must be paid out eventually to some other counterparty of the firm. One alternative to attacking monopoly power through breakup of large firms or limits on anticompetitive conduct in the marketplace is therefore to prevent any one counterparty of the firm from so dominating firm governance as to be able to induce the firm to oppress other counterparties for its benefit. Creating a balance of power in firm governance, by giving all counterparties the right to elect board members, would eliminate the internal forces that induce firms to exercise monopoly power. But it would not prevent firms from engaging in productive, pie-expanding, behavior, because such behavior tends to expand the business that the firm does with all of its counterparties—or at least enables the firm to use a share of the gains to compensate those counterparties that lose out—and therefore benefits them all.

Keywords: antitrust, corporate law, nexus of contracts, inframarginalism, corporate governance, monopolization, monopoly power, exploitation

JEL Classification: D21, D30, D42, D63, K21, K22, L22, L40

Suggested Citation

Woodcock, Ramsi, Antitrust by Interior Means (September 25, 2021). in The Intersections between Competition Law and Corporate Law and Finance (Cambridge Univ. Press) (Forthcoming), Available at SSRN: https://ssrn.com/abstract=3930669

Ramsi Woodcock (Contact Author)

University of Kentucky College of Law ( email )

620 S. Limestone Street
Lexington, KY 40506-0048
United States

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