Monday, November 25, 2013
Steve Salop (Georgetown) has written The Protected Profits Benchmark: Responses to Comments.
ABSTRACT: In my earlier article, I proposed the "Protected Profits Benchmark" (PPB) price standard for determining whether or not a vertically integrated monopolist is engaged in a refusal to deal or price squeeze in violation of Section 2 of the Sherman Act. The PPB would be used where market benchmarks do not exist or do not apply. Violating the PPB price involves profit-sacrifice, which suggests anticompetitive animus. When products are homogeneous, a wholesale price that violates this price standard would exclude an equally efficient entrant. As a result, there will be less competition in the downstream (output) market in which the entrant is trying to compete. This article responds to several Comments. While the Commentors all agree that refusals to deal and price squeezes can be determined by the use of some price benchmark, contrary to the Court’s suggestion in Trinko and linkLine, the Commentors have raised a number of issues. These include whether the PPB is the proper standard, whether it is administrable, and whether it should be adjusted for particular fact situations. The Response article explains either how the Commentors’ concerns can be incorporated into the standard or why they should not be incorporated.