Countervailing Exploitative Pricing With Joint Negotiation Entities

One strand of the Neo-Brandeisian critique of traditional antitrust involves the permissive approach to exploitative pricing. Exploitative pricing by powerful firms with durable, but legitimately obtained market power, including non-innovative oligopolists that succeed in coordinating prices without illegal agreements, are permitted (even blessed) by U.S. antitrust law. In response to this part of the Neo-Brandeisian critique, this exploratory essay develops an antitrust exemption to countervail the dominance of these powerful firms. The exemption permits formation of voluntary associations of small market participants to collectively bargain with these powerful, dominating counterparties, that is, counterparty firms that have substantial classical market (or monopsony) power or dominant bargaining power. The size and conduct of the associations are structured and limited so the associations can achieve only “moderate” bargaining power. This more balanced bargaining power leads to increased output, lower downstream prices and increased allocative efficiency, as well as increased economic welfare of association members. The restrictions on the associations will ensure that they do not gain cartel market power that reduces output and require that they be disbanded if competition emerges to eliminate the counterparty firms’ domination. Such associations might be formed by either small input suppliers or small input purchasers, and the exemption also might be extended to final consumers. The associations would be constrained in ways to prevent broader collusion or exclusion. While obviously a substantial policy change, current concerns about market and monopsony power in the new Gilded Age, along with associated concerns regarding economic inequality, suggest that this limited exemption might benefit society without harming economic efficiency. The exemption would be applied only to counterparties and markets that raise the greatest concerns. Even without an antitrust exemption, such associations might be mandated by a court as a remedy in a merger or anticompetitive conduct case