Buying Power Today

Buying Power Today

 

John B. Kirkwood

Seattle University School of Law

Abstract

Buyer power has long been a neglected issue in antitrust law. Thanks to Bert Foer and others, however, that has changed. In the last two decades, studies have shown that monopsony power is a widespread problem, particularly in labor markets, and challenges to anticompetitive conduct by buyers have increased sharply. Monopsony power is now on the antitrust agenda. At the same time, interest in the other form of buyer power, countervailing power, has also increased. In two high-profile merger cases, Anthem/Cigna and Aetna/Humana, the parties claimed they could save billions of dollars of medical costs by reducing their payments to hospitals, doctors, and other providers. These cases might have marked the first time that countervailing power had justified an otherwise anticompetitive merger. But the parties refused to assert that they would use their post-merger purchasing power to extract bigger discounts from providers. Instead, they would take a variety of less muscular steps. These steps were fraught with practical difficulties, however, and the savings claims were rejected. In the end, the procompetitive benefits of countervailing power were never determined.