No Shortage of Theories: The Role of Capacity in Antitrust Analysis

Seth B. Sacher, Federal Trade Commission and Jeremy Sandford , Federal Trade Commission offer No Shortage of Theories: The Role of Capacity in Antitrust Analysis.

ABSTRACT: Issues of productive capacity can play a role in nearly every aspect of competition analysis. This paper provides an overview of the economic literature on capacity and the role that capacity has played in actual antitrust and competition law enforcement. The goal is to aid practitioners in matters where capacity issues potentially play a significant role. For the most part, the theoretical role of capacity in various aspects of competition analysis is ambiguous and the empirical literature is similarly inconclusive. Moreover, in many situations, measuring excess capacity may be quite difficult. Given the theoretical and empirical ambiguity regarding the role of excess capacity, or the lack thereof, the overall theme of our analysis is that practitioners should not presume any particular impact in the absence of strong case-specific evidence regarding capacity’s effects.