Reexamining antitrust: can "anticompetitive" business practices benefit consumers? - Law & Justice

USA Today (Society for the Advancement of Education), March, 2002 by Wayne Crews

Every product possesses more than one characteristic or consists of some bundle of products, making every sale a "tie-in" one. Drills come with bits; cars come with engines; televisions come with remote controls; and cable television comes with channels no one wants.

Tying arrangements can help ensure the primary product's longevity, functionality, integration, and perceived quality by "discouraging" the purchaser's use of products offered by the seller's rivals. Tie-ins can help a seller avoid warranty expenses and product complaints. In addition, they can encourage customers to try something new and help small firms who lack the financial wherewithal of larger rivals to avoid duplicating selling and administrative expenses across their products.

While Bork ended up as a critic of Microsoft's business practices, it is he that properly characterized the tying issue: "There is no viable theory of a means by which tying arrangements injure competition, and there are several obvious ways in which they benefit both seller and consumer," he stated in The Antitrust Paradox: A Policy at War with Itself.

9. Strategic predatory behavior. So-called predatory pricing allegedly lowers price and thus the revenue and profits of rivals. Yet, rivals' profits can be reduced by other strategic behaviors. Altering advertising intensity or product quality to induce one's rivals to suffer increased costs (or decreased revenues), collectively know as nonprice predation, is an example, as are strategic exclusive dealing arrangements that seek to shut out competitors.

Manipulating rivals' profitability is the very essence of business and indistinguishable from ordinary, healthy, competitive rivalry. Yet, is has spawned a veritable academic industry devoted to identifying competitive strategies as means of "monopolization."

The act of competing aggressively can become a crime under theories of strategic predation. A firm's guilt depends on an enforcer's opinion that its successful efforts to serve the market--and, hence, to force rivals to work harder--has a "dangerous probability of success" in creating a monopoly. This runs counter to the theory that the purpose of competition necessarily is to oust or supplant less-efficient rivals, leaving the least-cost producers in place. Price, quality, and other features are manipulated in order to serve consumers as part of the market's discovery process.

All market participants are equally free to act in their own self-interest, as well as mobilize against a renegade firm's efforts to monopolize. The alleged predator is never the only one capable of strategizing in a "predatory" manner. There is, however, one form of nonprice predatory behavior that genuinely is anticonsumer and antimarket. Bringing a nuisance antitrust suit against more-efficient rivals is perhaps the most effective way of raising rivals' costs.

10. Exploiting technological lock-in. Certain goods gain value with a greater number of users. Telephones or fax machines, for instance, are useless if merely a single individual possesses one, but increasingly valuable as ownership spreads. Some worry that this value-in-adoption mechanism can lead to inefficient products becoming locked in, either by chance, luck, or by scheming manufacturers. Microsoft's Windows operating system and AOL's Instant Messenger are prominent cases.