JOSEPH P. GUILTINAN is Professor of Marketing, Mendoza College of Business, University of Notre Dame. Antitrust law is concerned with business conduct that distorts the mix of products and prices that a free market would make available to consumers. Historically, antitrust has drawn its theoretical outlook primarily from economics (see Leary 2001; Scheffman 1996). Accordingly, the focus of antitrust policy and judicial interpretation involving such conduct has been on the consequences for price. When mergers, collusive agreements (such as price fixing), predation, practices that raise rivals’ costs, resale price maintenance, and nonprice vertical restraints (such as tying and exclusive dealing) receive scrutiny, these practices have traditionally been evaluated in terms of their effect on prices. However, the major impact of those practices of concern to antitrust might well be on nonprice dimensions of choice rather than on prices (Lande 2001). Thus, in recent years, arguments have been put forth that both antitrust law and consumer protection law would be well served by adopting choice as their ultimate goal (see Averitt and Lande 1997; Lande 2001). The prospective choice-centered view is motivated by the reality that, in many sectors of the economy, nonprice attributes of products dominate consumer choice processes (Leary 2001). In addition, from a competitive perspective, price is only one of a subset of strategic variables that firms use to acquire and retain customers. Thus, conduct that reduces a rival’s ability to compete on the basis of distinctive features and benefits warrants significant antitrust attention. These are realities that have long been recognized by marketing scholars. However, antitrust is largely unaware of marketing theories and empirical regularities regarding consumer and firm decision making that might provide the basis for a truly choice-centered antitrust policy. The first purpose of this article is to demonstrate how the existing knowledge base of marketing (and allied business disciplines) can inform antitrust on the issues of choice and variety. Marketing scholars have expertise on (1) how consumers make choices from a variety of options and (2) how firms make choices on what variety to offer. Many scholars who have contributed to knowledge in these areas may not be fully aware of the public policy relevance of their research. However, as noted in Table 1, marketing perspectives can substantially enhance antitrust analyses when business conduct threatens choice on nonprice dimensions. Because scholarship in marketing has historically adopted a managerial perspective, little of the established knowledge has been focused on public policy questions. Thus, a second purpose of this article is to identify specific research opportunities for marketing scholars to contribute to antitrust policy. Because the two dimensions (i.e., consumer choice and supplier choice) represent opposite sides of the market exchange and have been studied by different scholars applying distinct research methods, I treat them separately. First, I examine how economics and marketing differ in their conceptualization of consumer choice. These differences result in distinct views on (1) the basis for identifying the set of competitors in a market and (2) the value to consumers of having a variety of choices. Marketing knowledge can inform public policy on these issues, and I identify some critical questions marketing scholars might address to develop antitrust thought on these points. Subsequently, I contrast economic and marketing views on the forces that determine the variety supplied. In economic theory, variety is a function of economies of scale and of the competitiveness of the market. I show that estimates of the variety that might be expected in a market and an understanding of the business motives of firms in setting variety policy cannot be reliably developed without analyses from marketing (and other business disciplines), which incorporate consideration of firms’ unique resources and contexts. Such analyses can assist antitrust judgments about market power when competition is based on nonprice attributes of products.
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Jan 30, 2007
Craig R Carter + 1
Open Access