Antitrust Law's Harm to Competition: A New Understanding of Exclusivity

Ittai Paldor*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

One of the long-accepted axioms of antitrust law is that the competitive danger posed by exclusivity agreements increases as the market share foreclosed by these arrangements increases. The larger the market share foreclosed by an exclusivity agreement, the less likely the arrangement is to be upheld by courts. And exclusivity arrangements foreclosing extremely large market shares are practically never upheld. The business community has responded by forsaking such arrangements (or concealing them). This Article challenges this very intuitive axiom. It shows that due to an unobserved feature of exclusivity, when extremely large market shares are foreclosed, the competitive danger posed by these arrangements decreases. Exclusivity arrangements foreclosing market shares of 85% and higher should be presumed competitively benign, and therefore legal. Several illustrative examples of industries, in which widespread exclusivity should be allowed in contradiction to the current understanding, are provided. The analysis developed in this Article suggests that for decades antitrust law has been decreasing welfare by forcing businesses to steer clear of a welfare-enhancing practice. The Article calls for a change of this paradigm.

Original languageAmerican English
Pages (from-to)1095-1155
Number of pages61
JournalBuffalo Law Review
Volume69
Issue number4
StatePublished - 2021

Bibliographical note

Publisher Copyright:
© 2021 State University of New York at Buffalo Law School. All rights reserved.

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