Tuesday, May 17, 2011
Posted by D. Daniel Sokol
John B. Kirkwood, Seattle University School of Law has an interesting article on Buyer Power and Merger Policy.
ABSTRACT: Large buyers now occupy prominent positions in many sectors of the economy, from the packing of meat to the retailing of groceries and books. Antitrust law, however, has remained much more concerned with seller power than buyer power. In the merger area, antitrust enforcement has been riveted on a single anticompetitive possibility – that a merger of buyers would create monopsony power (the mirror image of monopoly power). Mergers that would harm competition through the exercise of buy-side countervailing power (the ability to reduce the market power of suppliers) are not addressed by the government’s guidelines, the leading treatises, or the case law. This article provides a comprehensive reexamination of buy-side merger policy. It defines the two types of buyer power, describes their procompetitive and anticompetitive effects, and reviews an array of evidence on the impact of countervailing power. It analyzes the traditional approach to mergers that create monopsony power and suggests modifications that reflect the dynamics of buyer power. It contains the most detailed discussion to date of buy-side countervailing power and the policy issues it presents, including a description of ten different scenarios in which a merger that augmented such power would reduce competition and diminish the welfare of suppliers, consumers, or society.