Should Price Squeeze Be a Recognized Form of Anticompetitive Conduct?

Posted by D. Daniel Sokol

Dennis Carlton of the University of Chicago Graduate School of Business asks Should Price Squeeze Be a Recognized Form of Anticompetitive Conduct?

ABSTRACT: Should a price squeeze constitute anticompetitive conduct requiring investigation under the antitrust laws? A price squeeze occurs when a vertically integrated firm supplies an input to its downstream competitors at a price that generates a profit margin so low that the competitors exit the downstream market. I ask whether it is sensible to try to use antitrust laws to prevent such conduct or whether such an attempt would create more harm than benefit. The current case, linkLine Communications, Inc. v. SBC California, Inc., raises this exact question.