The Economics of Foreclosure: A Lawyer's Guide

• Published in: Antitrust 2018-04, Vol.32 (2), p.49-56
• Main Authors: Keyte, James, Evans, David S, Garces, Eliana
• Format: Magazinearticle
• Language: English
• Subjects: Analysis; Antitrust law; Clayton Antitrust Act 1914-US; Competition; Consumers; Distribution costs; Economic aspects; Economics; Economists; Evaluation; Foreclosure; Law and economics (Jurisprudence)
• ISSN: 0162-7996; 2162-996X

[...]as many foreclosure issues arise in the context of non-price vertical restraints- subject to the full rule of reason-what procompetitive benefits could economists present to the fact-finder as part of the overall assessment of whether the restraints should be condemned? [...]in any foreclosure context, the defendant's documents, testimony, or other facts, may contradict the economic theory and calculations, raising the possibility that the economist's theory, assumptions, or estimations are suspect. [...]in evaluating horizontal mergers between multichannel video distributors (such as Charter and Time Warner Cable) and vertical mergers between video distributors and content providers (such as Comcast and NBC-Universal), the U.S. Department of Justice and Federal Communications Commission have examined whether the merger would enhance the incentive and ability of these entities to foreclose rival video distributors (like Netflix) from key inputs (broadband or content). [...]the "but-for world"-i.e., if the foreclosure had not occurred-may involve significant sales or share that is not "contestable" in the first place because it would likely have always gone to the defendant-i.e., the "but-for foreclosure" rate.36 Economists have tended to look at effects through this "but-for" lens for many decades, even if that is not always the case in the courts.37 The difference in estimated "foreclosure rates" can be quite dramatic, depending on the size of the non-contestable share that would likely go to the defendant irrespective of the contracting conduct at issue. [...]of interdependent demand, the profit-maximizing prices to customers on each side of the market do not necessarily track demand or costs on that side, and business strategies must account for the fact that benefits and costs are created jointly across both sides of the market.44 A key distinguishing feature of these platforms, in comparison with traditional firms, is that the platform is mainly in the business of selling each group of customers access to the other group, so that each group is an input into supplying the other.