Antitrust Law and Economics, Volume 21 (Research in Law and Economics)

As readers have noticed, the last several volumes of Research in Law and Economics have consisted of special issue volumes. This will continue. This volume is one of the best. Jack Kirkwood put this volume together with modest assistance from me. I believe this is an outstanding volume and expect to meet the high standard set here in future volumes. 12.sdarticle.pdf......Page 0 INTRODUCTION......Page 4 Part I - The Economic Research Papers......Page 6 Part II - The Meaning of Consumer Welfare......Page 7 Part III - Buyer Power, Consumer Welfare and the Robinson-Patman Act......Page 10 The Standard Oil Breakup......Page 13 The National Cash Register Case......Page 14 The Morton Salt and International Salt Cases......Page 16 Ten Monopolization Cases with Conduct Orders......Page 18 The United Shoe Machinery Case......Page 20 The Canadian Propane Case......Page 22 Vertical Foreclosure......Page 25 Mergers of Differentiated Products......Page 27 Patent Settlements......Page 29 PART II THE MEANING OF CONSUMER WELFARE......Page 31 COMPETITION NOT COMPETITORS......Page 33 THE PRIMACY OF CONSUMER INTERESTS......Page 34 THE DEFINITION OF CONSUMER WELFARE......Page 36 PART III BUYER POWER, CONSUMER WELFARE AND THE ROBINSON-PATMAN ACT......Page 38 MONOPSONY POWER......Page 39 DOMINANT FIRM ALL-OR-NOTHING CONTRACTING POWER......Page 40 BARGAINING POWER......Page 41 IMPACT ON CONSUMERS......Page 44 CONCLUSION......Page 48 REFERENCES......Page 63 TITAN AGONISTES: THE WEALTH EFFECTS OF THE STANDARD OIL (N. J.) CASE......Page 66 INTRODUCTION......Page 67 DESCRIPTION OF THE FINANCIAL DATA......Page 71 EMPIRICAL ANALYSIS......Page 72 DISCUSSION......Page 79 CONCLUSION......Page 82 ACKNOWLEDGMENTS......Page 86 REFERENCES......Page 87 SUCCESSFUL MONOPOLIZATION THROUGH PREDATION: THE NATIONAL CASH REGISTER COMPANY......Page 88 INTRODUCTION......Page 89 THE CASH REGISTER AND N.C.R.: A BRIEF HISTORY......Page 90 THE COMPETITION DEPARTMENT......Page 93 ACQUISITIONS......Page 98 ANTITRUST REDUX......Page 107 The Appeal......Page 108 EPILOGUE: THE CONSENT DECREE AND ITS AFTERMATH......Page 110 SUMMARY AND CONCLUSIONS......Page 114 REFERENCES......Page 127 INTRODUCTION......Page 129 The Robinson-Patman Act......Page 130 The Carload Discount on Other Table Salt......Page 132 Possible Reasons for Annual Discounts......Page 133 Provisions of the Code......Page 135 Pricing......Page 136 Trade Practices......Page 138 Selling Practices During the Code......Page 139 Brokerage......Page 140 Discounts......Page 141 The Producers......Page 142 Events After the Code......Page 144 Introduction......Page 146 Salt Company Selling Practices......Page 147 Testimony on the Ubiquity of the $1.50 Carload Price......Page 148 Conditions Under Which $l.60 Per Case was Charged......Page 150 Other Evidence on the Infrequency of Sales at $l.60 Per Case......Page 151 The $l.50/$l.60 Differential Before the FTC and the Courts......Page 152 The FTC's Opinion......Page 153 The Court of Appeals......Page 154 The Supreme Court's Opinion......Page 156 Price Discrimination and the $l.50/$l.60 Differential......Page 157 Introduction......Page 158 Evidence About the Discount......Page 159 New York Territory......Page 160 Louisiana Territory......Page 162 Ohio and Kansas Territories......Page 163 The Remaining Territories......Page 164 The Evidence Against Morton......Page 165 Morton's Carload Discount Before the Commission and the Courts......Page 166 The Commission's Opinions......Page 168 The Discount in the Court of Appeals and the Supreme Court......Page 169 The Effect of the Commission's Order......Page 170 The Absence of a Straight Car Discount......Page 171 The Discount......Page 173 Controversy Over the Discounts During the NRA......Page 177 Consideration of the Discount by the Code Committee......Page 178 The Report of the Committee in Support of the Discount......Page 182 Analysis of the Possible Cost Differences......Page 183 The Reports of the Committee in Opposition......Page 185 The Revisions Made in July 1936......Page 188 Revision in Buyer Qualification......Page 189 Change in the Argument About Cost Justification......Page 191 Difficulties Posed by the FTC's Challenge......Page 192 Change in the Size of the Discount......Page 193 Introduction......Page 194 Establishing the Discount and Qualified Buyers......Page 195 International's Position on Meeting Competition and Cost Differences......Page 197 International's Discount and Qualification of Buyers......Page 199 Qualification of Other Discount Buyers......Page 200 Morton's Position on Meeting Competition......Page 202 International's Efforts During the Trial......Page 203 The Commission's Position......Page 205 Difficulty Posed by Rejection of Meeting Competition Defense......Page 206 General View of Differences in Costs......Page 208 Earlier Cost Study by International......Page 211 Cost Justification During the Trial......Page 213 Rejection of the Defense by the Hearing Examiner and Commission......Page 220 Cost Differences Noted by Union Salt Co.......Page 222 Diamond Crystal's Position......Page 223 Morton's Position......Page 224 Testimony of Buyers on Purchasing Practices......Page 225 Morton's Position......Page 227 Rejection by the Commission......Page 229 The Question of Competitive Injury......Page 230 Introduction......Page 232 Morton's Cost Study......Page 233 The Views of the Commission and the Courts......Page 235 Morton's Study of Order-Related Expense......Page 236 Merchandising Expense......Page 242 The 5,000 Case Discount on BL......Page 246 CONCLUSIONS......Page 248 APPENDIX A......Page 263 APPENDIX B......Page 264 APPENDIX C......Page 265 APPENDIX D......Page 267 The Approach as Revealed in Morton......Page 269 The Industries in Which Orders Have Been Entered, 1936-1980......Page 270 The Number of Orders......Page 276 INTRODUCTION......Page 278 GOVERNMENT VICTORIES IN MONOPOLIZATION CASES......Page 279 United Shoe Machinery9......Page 280 The Government's Victory and Proposed Relief......Page 281 The Effect of the Decree......Page 282 The 1949 AT&T (Western Electric) Case......Page 284 The Telephone Industry in 1949......Page 285 The Antitrust Complaint......Page 286 The 1956 Consent Decree......Page 287 The Effects of the Decree......Page 288 Conclusion......Page 289 The Antitrust Case......Page 290 The Theory of the Case......Page 291 Refining......Page 292 Retailing......Page 294 The Effect of the Decree on Gasoline Prices......Page 296 Conclusion......Page 298 Effects of the Decree......Page 299 The Antitrust Suit......Page 301 The Decree......Page 302 The Banana Market Before and After the Decree......Page 303 Amateur Photography......Page 305 The complaint......Page 307 The decree......Page 308 Film sales......Page 309 Kodak's sales and profits......Page 310 Prices......Page 311 Conclusion......Page 313 Food Retailing......Page 314 The Antitrust Suit......Page 315 The Impact of the Decree......Page 316 The Role of the Bus in the United States......Page 318 The Antitrust Complaint......Page 320 The Market for Transit Buses After the Decree......Page 321 Entry by AM General......Page 322 Intercity buses......Page 324 The effects of the decree on prices......Page 325 Conclusion......Page 326 The Antitrust Suit......Page 327 The Effects of the Decree......Page 328 Trading Stamps - A Marketing Tool......Page 331 The Growth of Blue Chip......Page 332 Effect of the Decree......Page 333 Conclusion......Page 335 CONCLUDING OBSERVATIONS......Page 336 REFERENCES......Page 343 Legal Cases......Page 345 INTRODUCTION......Page 346 Formation of the United Shoe Machinery Corporation......Page 347 The 1918 Decision13......Page 348 The 1922 Decision35......Page 351 The 1953 Decision46......Page 352 NON-LEASE COMPLAINTS......Page 354 Acquisitions......Page 355 Pricing Policy for Shoe Machinery......Page 356 Policing Competitors......Page 357 Patents......Page 358 Shoe Factory Supplies......Page 359 LEASE-RELATED ALLEGATIONS......Page 361 The Lease-Only Policy......Page 363 Procompetitive Motivations for Leasing......Page 364 The coase conjecture......Page 366 Lease Term......Page 368 Full-Capacity Clause and Monthly Minimum Charge......Page 370 Discriminatory Enforcement of the Return Charge, Commutation Charge, and Right-of-Deduction Fund......Page 374 "Free" Service189......Page 380 Effectiveness of Judge Wyzanski's Remedies......Page 386 Private Actions216......Page 388 CONCLUSION......Page 391 REFERENCES......Page 407 Legal Cases......Page 409 AN ECONOMIC JUSTIFICATION FOR A PRICE STANDARD IN MERGER POLICY: THE MERGER OF SUPERIOR PROPANE AND ICG PROPANE......Page 410 INTRODUCTION: EQUITY AND EFFICIENCY IN MERGER POLICY......Page 411 Canadian Merger Review......Page 413 Equity Concerns of the Merger17......Page 415 The Tribunal's First Decision......Page 416 Application of the Total Surplus Standard to the Propane Merger......Page 417 The Welfare Calculations are Incorrect......Page 419 The Commissioner's Appeal......Page 420 The Effect of Demand Elasticity on Equity and Efficiency......Page 421 The Four Standards......Page 423 Applying the Four Standards to the Merger......Page 424 The Federal Court of Appeal's Review......Page 425 The Tribunal's Second Decision......Page 426 Harberger's Approach to the Trade Off of Equity and Efficiency......Page 428 The Equitable Function of Merger Review and the Role of Moral Sentiments......Page 430 Determining the Injury......Page 431 Including the Willingness to Pay for Equity......Page 432 What if Moral Sentiments Apply Only to a Subset of Consumers?......Page 434 The Propane Merger With Compensation......Page 435 CONCLUSION......Page 436 REFERENCES......Page 443 Legal Cases......Page 444 INTRODUCTION......Page 446 PRIOR STUDIES OF VERTICAL MERGERS......Page 447 VERTICAL INTEGRATION AND FORECLOSURE......Page 449 The Old Leverage Doctrine and the Chicago Critique......Page 450 A Simple Example6......Page 451 A Formal Analysis......Page 453 IMPLICATIONS FOR ANTITRUST POLICY......Page 456 CONCLUDING COMMENTS......Page 457 REFERENCES......Page 458 Legal Cases......Page 459 INTRODUCTION......Page 460 OVERVIEW......Page 462 Hedonic Regression and Notation......Page 465 Consumer Preferences......Page 466 Definition of Competitive-Neighbors......Page 469 APPLICATION TO MERGER ANALYSIS......Page 470 CONCLUSION AND EXTENSIONS......Page 471 ACKNOWLEDGMENTS......Page 474 SETTLING THE CONTROVERSY OVER PATENT SETTLEMENTS: PAYMENTS BY THE PATENT HOLDER SHOULD BE PER SE ILLEGAL......Page 475 INTRODUCTION......Page 476 Proposition 1: Settling Patent Litigation Can Be Efficient......Page 477 Proposition 2: With Equal Expectations as to Patent Validity, the Profit-Maximizing Strategy is Always to Settle......Page 479 Proposition 3: With Equal Expectations as to Patent Validity, the Welfare-Maximizing Settlement is a License......Page 480 The Impact of Different Expectations as to the Patent Validity......Page 481 THE ECONOMIC NATURE OF A PATENT......Page 485 What Rights Do Patents Confer?......Page 486 Institutional Failure......Page 488 "Interim" Settlements......Page 489 CONCLUSION......Page 490 Publications......Page 498 APPENDIX A......Page 499 APPENDIX B......Page 501 APPENDIX C......Page 503 APPENDIX E......Page 504 This volume contains ten papers, by many prominent authors, examining antitrust issues of current interest. The first paper summarizes the other papers and presents original research on the meaning of consumer welfare and the sources of buyer power. The next five articles evaluate older antitrust cases to determine whether the decisions reached, the relief ordered, or both, enhanced consumer welfare. The seventh paper describes a new measure of efficiency that gives greater weight to consumer harm and applies it to a recent merger. The next paper explains a new way in which vertical foreclosure can enhance the market power of an upstream supplier. The ninth article refines an innovative technique for identifying substitutes among a set of differentiated products. The tenth paper confronts a contentious policy issue - the treatment of patent settlements in which the patent holder pays the challenger to exit the market - and concludes that they should be per se illegal.