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Competition Policy and the Control of Buyer Power

A Global Issue

Peter C. Carstensen

This book provides a comprehensive overview of the economic and competition policy issues that buyer power creates. Drawing on economic analysis and cases from around the world, it explains why conventional seller side standards and analyses do not provide an adequate framework for responding to the problems that buyer power can create. Based on evidence that abuse of buyer power is a serious problem for the competitive process, the book evaluates the potential for competition law to deal directly with the problems of abuse either through conventional competition law or special rules aimed at abusive conduct. The author also examines controls over buying groups and mergers as potentially more useful responses to risks created by undue buyer power.
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Chapter 1: Buyer power: a pervasive challenge to competition policy

A Global Issue

Peter C. Carstensen

Every economy faces the challenge of creating and maintaining a workable system for producing and allocating goods and services as well as providing incentives and rewards for innovation. The resulting economic order must be resilient and respond positively to change because economies are inherently dynamic. Since the end of World War II, and even more since the collapse of the Soviet system, a nearly global consensus has emerged that economies should be based on market processes. The degree of reliance on markets and the rules defining or constraining their structure and use vary. Nevertheless, the core recognition is that market processes, with appropriate oversight of the conduct of the participants, are central to achieving socially desirable economic results both in the short term and the long term. Thus, competition policy broadly defined is itself an essential feature in every such economic system.

Conventional thinking about competition policy has emphasized the market distortion of seller power, resulting in harm to consumers and to the dynamics of markets. Less appreciated, but potentially even more harmful, is the exploitation of buyer power. A central claim of this book is that abuse of buyer power is a threat at least as serious to the competitive process as the abuse of seller power. The abuse of buyer power is often more embedded in the market process than abuse of seller power. Because it can result in lower input prices, which in turn may contribute to lower final prices to consumers, exploitation of buyer power can take on a superficial, pro-consumer character, making its harmful characteristics less visible. Standard ideology in competition policy emphasizes a singleminded pursuit of ‘consumer welfare’, which further obscures the harm to competition from abuse of buyer power. Moreover, its impact is often dispersed over a wide range of stakeholders, further decreasing awareness of its impact. Thus, it has been politically and ideologically challenging for those competition law enforcers inclined to pursue a more active policy.

Many commentators hold the erroneous belief that the risks of buyer power are limited to contexts in which there are many producers and few buyers. Such markets include agriculture, retail commodities and employment. In fact, the risks of buyer power are likely to exist in any buying market in which a buyer has substantial power. Unfortunately, only limited data and examples illustrate that broader problem because of the failure of most competition authorities and scholars of competition issues to focus on it. Certainly, the potentially abusive use of buyer power is highest when the buyer is a relatively large firm and the producers from which it buys are comparatively small. Indeed, there are many examples from retailing in which even firms of substantial size have been subject to abusive buying practices. Parity of size in a market reduces some of the risk of abuse, but a producer with market power that sells to a buyer with market power is likely to have upstream buyer power by virtue of that relationship. The harmful consequences of, for example, a merger that enhances the power of a buyer may well be felt by the upstream suppliers of any producer that deals directly with that buyer.

This combination of economic, ideological and political characteristics has resulted in an underappreciation of the risks buyer power poses. It also has resulted in only a modest, but growing, amount of useful economic theorizing and modeling. The existing empirical and theoretic analyses, however, demonstrate that different metrics and measures are necessary to determine when the use of buyer power, which is a common aspect of many market relationships, becomes or should become a source of competitive policy concern. This book joins a short, but growing, list of efforts to contribute to a better conceptualization of the competitive issues and the formulation of standards and criteria for judging the merits of buyer conduct.

At the outset it is important to stress the pervasiveness of the problems that buyer power causes for market economies. Commentators have observed that ‘monopsony is far more prevalent than many have recognized’, citing recent American examples including bid rigging in auctions for things ranging from antiques to treasury bonds, collusive practices involving financial aid to college students, salary setting for professional athletes, restrictions on college athletic scholarships and coaches, collusion to restrict competition for various kinds of technically skilled employees and restraints in agricultural product markets.1

Illustrative of the long-run harm in the United States is the transformation of rural America. The historical record clearly shows that farmers have gotten less and less of the food dollar as large buyers have increasingly dominated the buying of agricultural commodities.2 When large grocery retailers demand lower prices, the processors in turn drive down the prices they pay for the inputs from the farm. This exploitation of buyer power has sapped the economic viability of America’s farmers, especially those operating small to mid-sized farms.3 The consequences are visible in the overall decline of rural America and in the fact that the average age of American farmers is now in the late 50s.4 There has been a steady exit from farming of the children of farmers and little new entry by others. Farmers serving commercial poultry processors are subject to such comprehensive controls that an Attorney General of Oklahoma once opined that the contracts made them employees of the processor.5 But, of course, these farmers get none of the benefits accorded employees. Their treatment indeed makes them more like serfs than traditional farmers.

Buyer exploitation of farmers is not limited to the United States. Various commentators have expressed concern over the ways in which the large global buyers of agricultural commodities exploit their ability to drive down farm gate prices.6 In many countries agriculture is highly dependent on export markets. In cocoa and bananas, the highly concentrated buying markets have resulted in long-term exploitation of producers.7 Historically, these countries also had monopsonistic, state-run buying agencies that further exploited producers. Over the last 30 years those agencies have largely disappeared, but the results for farmers have not always been significantly better.8

In 2010, Olivier De Schutter, United Nations Special Rapporteur on the Right to Food, published a short discussion of the role of buyer power in the food chain with a specific focus on developing countries.9 He reported that:

[J]ust four firms carry out 45% of all coffee roasting, and only four firms carry out 40% of all international coffee trading. Similarly, just three companies control over 80% of the world’s tea markets, and four companies control 40% of international trading in cocoa, 51% of cocoa grinding and 50% in confectionary manufacturing.10

Thus, both developed and less developed countries experience pervasive buyer power in agriculture.

Another classic example of buyer power’s harmful consequences is the exploitation of workers. Employers can and do drive down wages even when the employer is profitable if market conditions support such exploitation. Moreover, there is often a downward ‘ratchet’, through which competing employers exercise their power over their workers to further depress wages and other workplace investments in order to offer greater discounts to the powerful buyers they supply. The consequence of lower wages is less capacity for workers to buy goods and services. This kind of exploitation transfers wealth from poor workers to wealthy owners. Those with modest incomes spend most of that income on goods and services, but the wealthy have a lower consumption function.11 Hence, the macroeconomic implication of such a wealth transfer, whether within a single country or from developing to developed countries, is that aggregate demand for many goods and services declines even if there is some growth in luxury goods markets. Depressed wages, therefore, greatly increase the probability that an economy will stagnate. Demand drives investment and economic growth, but when the majority of wage earners face flat or declining wages there is little room for increased demand.

The effect of buyer power on workers is evident worldwide. In the United States, there have been several conspiracies to reduce wages for nurses.12 A number of major technology companies in Silicon Valley entered into a conspiracy not to compete for each other’s employees. When sued by the Department of Justice, the companies agreed not to engage in such conduct in the future.13 Their employees brought a major class action suit,14 in which the judge initially concluded that the proposed $325 million payment was inadequate.15 Subsequently, the court approved a $415 million settlement.16 There is a long history of employer collusion back to the post-Civil War era, when plantation owners agreed not to compete with each other for sharecroppers. In effect, this imposed a new kind of economic slavery on the recently freed slaves.17

In the case of developing countries, global buyers victimize employers and their employees. They use their buyer power to drive down prices to the point that employers are unable to pay adequate wages or make the necessary investment in facilities that will provide a safe working environment. The collapse of entire factories and the catastrophic fires resulting from inadequate safety are recurring events in Pakistan and Bangladesh.18 The buying practices of the large multinational enterprises that buy most export commodities is a continuing source of concern to human rights advocates concerned with developing countries.19

Farmers and workers are not the only victims of buyer power. Its abuse is a recurring concern in retail sales relationships for branded and generic goods. Whenever there are relatively few outlets for consumer goods, a retailer will have significant buyer power that it can exploit in a variety of ways that harm the producers and ultimately the economy generally by causing dynamic distortion, limiting consumer choice and transferring to the retailer wealth that ought to go to producers. Walmart is an example of this exploitation of producers.20 Amazon, because of its dominance of the e-book business, has imposed price and non-price burdens on book publishers in the United States, Germany and globally.21 Both Walmart and Amazon justify their exploitation by pointing to their low prices, but sharing the gains of abusive buying practices is not a legitimate defense for anticompetitive conduct.

Other examples of misuse of buyer power show the range of contexts in which it occurs. Through its ownership of two large chains of eyeglass retailers in the United States, Luxottica was able to limit Oakley’s access to the market and ultimately forced it to sell out, further entrenching Luxottica’s control of supply.22 As a result consumers ultimately faced both higher prices and reduced choice. In markets with high concentration on both the buying and selling side, the abuse of buyer power can occur even if the courts regard such conduct as irrational and implausible.23 Smaller motion picture chains still face exclusionary use of buyer power by major chains—a problem of long standing.24

Perhaps the most visible context in which buyer power issues have arisen is in grocery retailing. The rapid expansion of high volume grocery supermarkets combined with significant mergers has resulted in many countries having highly concentrated grocery retailing markets from the buying side, even if consumers have two or three choices. A number of national competition authorities have belatedly discovered that buyer-side concentration creates significant problems for producers and ultimately is reflected in limited consumer choice and reduced competition in the supply markets. From the United Kingdom to Norway and Finland to Australia and South Africa the recognition of the threats to competition in food supply markets has generated a number of responses aimed at regulating in some way the conduct of large grocery buyers.25 Interestingly, the focus is often narrowly on grocery buying rather than the more general questions raised by concentrated retailing markets and their impact on upstream suppliers.

Indeed, the same risks of buyer exploitation arise in markets for a wide variety of components for assembly into more complex products or supplies to manufacturers. Buyers are often explicit in the strategy of creating a dependent relationship with key suppliers, that is, being the most important customer of that supplier.26 Walmart has a similar record, including driving some of its suppliers into bankruptcy.27 Boeing drove its suppliers’ prices down by 15 percent and then increased the lag in paying for inputs from 30 days to 120 days.28

Buyer power arises in markets in which producers have few options for the sale of their products and lack the capacity either to reduce production efficiently or transfer their facilities to other products. Larger producers, however, may be able to diversify their product lines.29 By reducing its dependency on any particular product line, even if most products have only a few buyers, an enterprise can survive and have a more effective bargaining position. It can refuse to produce at all if the terms are unsatisfactory. Of course, this is likely to impose significant costs on employees and the broader community in which a plant is located. In addition, the pressure on suppliers to diversify in turn drives mergers, which further concentrate the market structure and increase the resulting firm’s potential upstream buyer power.

The harms resulting from buyer power abuse spread from the initial victims and affect the wealth of the communities in which the producers operate. The suppliers to the input producer lose sales, and they too reduce employment and squeeze their vulnerable suppliers. Thus, the harm flows through the entire economy and is most hurtful when the economy injured is remote from any benefit that might accrue to the abusive buyer, its employees and customers. This is most obvious in export industries, where the exporting country suffers the losses and the importing countries enjoy the benefits. It is also apparent in American agriculture, where farmers bear the costs and urban consumers may get benefits. The capacity to transfer much of the economic risk to third parties is another aspect of buyer power that makes it both more pernicious than seller power and harder for competition authorities to deal with because of the dispersed nature of its impact.30

The traditional mantra of competition law has been that mere wealth transfer away from producers is not a competitive concern.31 Hence, much of the exploitation resulting from buyer power was and still is ignored. Indeed, using a short term, neo-classical model to look for harm to ‘consumer welfare’, or even total welfare, limits the enforcement agenda for competition authorities, and the competition enforcement agencies globally have been slow to react to the problems that buyer power can present. Public awareness and concern with the evident harm to the competitive process have resulted in an increasing number of regulatory responses. These often involve legal regimes beyond those envisaged in conventional competition policy. US competition law enforcers, those in the European Union (EU) and in a number of its Member States, the Russian Federation, Japan, the Republic of Korea, Taiwan (China), Canada, South Africa, Australia and a number of other countries, started to address buyer power issues at the start of the twenty-first century.32 In 2008, the Organisation for Economic Co-operation and Development (OECD) held a conference to discuss these issues.33 In 2013, the EU issued a Green Paper that reported the experience and substantial concerns of the Member States’ competition authorities with various ‘unfair’ trade practices.34 The paper suggests that the EU itself should consider developing uniform regulations designed to control such practices.35 The EU’s competition authority also created a panel that focused on issues related to food retailing, including problems with buyer power.36 But, adhering to the consumer welfare definition of competition law policy, the inquiry resulted in no change or improvement in EU enforcement with respect to buyer power.37 The United Kingdom, Russia, Norway, Finland, Australia, Japan and the Republic of Korea have established rules that treat abusive buyer exploitation of sellers as unconscionable conduct. In doing so, these laws seek to provide suppliers with a ‘voice’ because the option of an ‘exit’ is no longer available.38

Only in 2010 did the American antitrust authorities include an explicit section in their merger guidelines discussing the buyer-side merger analysis.39 From a historical perspective, this belated acknowledgement of the importance of buyer power analysis is striking; farm groups were primary advocates for the original American antitrust laws because of the exploitation of farmers in the sale of their commodities and livestock.40

Despite a gradual expansion of concern about buyer power in both economics and law, there remains a relative dearth of comprehensive evaluations of the unique characteristics of the buying side of the market. Few books have focused on buyer power, and none has examined the range of responses to buyer power that are emerging around the world. This book undertakes to link an analysis of the major competitive issues that arise from the use and abuse of buyer power to the responses of competition agencies, courts and scholars around the world. The focus is on the policy and legal issues in this field, although there must necessarily also be a substantial discussion of the economics. Indeed, the discussion will at least explore, even if it cannot definitively resolve, the questions of identifying the market structures and contexts in which buyer power is most likely to have adverse effects on the competitive process.

The contemporary literature on the legal policy issues that buyer power raises is not yet substantial, but it is growing in response, no doubt, to the increased focus on these issues by enforcement authorities.41 However, much of the work has focused on specific contexts, such as loyalty programs and slotting allowances, without a full recognition of the buyer power nexus involved in the topics under review. Moreover, there are deep divides among commentators with respect to the economic and the policy issues.42 One of the central issues is the degree of threat and potential for harm that comes from the abuse of buyer power. This study has a clear position that buyer power is both a serious and pervasive problem globally. It requires much more attention from competition authorities and policy makers generally than it has received.

Roger Blair and Jeffrey Harrison wrote an important book in 199343 that focused on the economics of buyer power with American antitrust law applications, and another in 2010.44 Especially in the more recent book, they take a relatively sanguine view of buyer power in many circumstances. A group of European agricultural economists have also produced a very useful book on food retailing and buyer power in the EU.45 Again, that book attempts to make the case that, although in some circumstances buyer power may contribute positively to economic welfare, in many other circumstances the likely impact is adverse. Neither of these works, nor the several books focused on labor issues, including those dealing with the monopsony issues in professional sports,46 focuses on the range of competition policy issues. These works have made important contributions, but a policy-oriented book with an international focus on competition law and policy provides a significant addition to the modest current literature.

The central thesis of this book, in contrast to Blair and Harrison, is that undue buyer power is a serious threat to the long-run achievement of a workable competitive economic process, but its abuse is inherently more difficult to control. At the very least, it is as serious a problem as seller power and even, I will contend, more serious. This is true despite some considerations that arguably induce buyers to be moderate in their exploitation of their suppliers.47

The goal of competition policy should be to define rules and standards that can effectively minimize exploitation and facilitate, over time, a desirable competitive process. Inherent institutional and economic characteristics, however, make it difficult to identify which controls over abusive buying practices by individual firms will produce the market incentives necessary to constrain buyer power. Hence, the appropriate legal standards for directly controlling unilateral abuse of buyer power are perhaps even more elusive than those for controlling monopolistic behavior. The difficulty with effectively identifying and implementing direct controls reveals the extraordinary challenges competition law has in dealing in a predictable and consistent way with unilateral buyer conduct that harms the competitive process.

Because of the explicit policy focus of the subsequent discussion, it is also important at the outset to identify the policy goals that will inform the subsequent analysis. This task requires an analysis of the contending claims for different goals as the primary purpose of competition law and policy. This topic will be addressed in Chapter 2 because it has particularly important implications for policy toward buyer power. When goals are framed in narrow, conventional economic-theoretical terms, the resulting policy implications downplay or ignore many competitively relevant aspects of buyer power. Chapter 2 provides both an analysis of competition policy goals generally and also focuses on the relevance of different ultimate goals for the framing of public policy with respect to buyer power.

Chapters 3 and 4 provide an economically oriented analysis of buyer power. Chapter 3, which draws on the work of Blair and Harrison, provides a deeper understanding of why buyer power is not the ‘mirror image’ of seller power. Indeed, the ‘mirror image’ metaphor is another of the obstacles to getting competition policy better oriented toward the risks that buyer power can present to the competitive process. Chapter 4 then examines how buyer power can affect competition adversely. The central premise is that exploitation of suppliers, and the resulting ripple effects on broad segments of society, is a primary competitive harm. It is particularly difficult to control exploitation directly in ways consistent with workably competitive markets. The difficulty stems from the need to balance control of abusive conduct with the recognition that some of the same conduct is important to the short-run and long-run achievement of an effective competitive process. Indeed, that tension concerning the use of buyer power creates the difficulty in framing useful rules of general application to control its abuse. This chapter also explains why overcoming buyer power is likely to be more difficult than overcoming seller power.

The next four chapters provide a comprehensive assessment of the options available to competition policy to deal with abuses, actual or potential, of buyer power. Chapter 5 examines competition policy options for controlling directly the unilateral abuse of buyer power. It evaluates the rules that can control both exploitative and exclusionary use of buyer power as well as the potential to impose structural remedies when such conduct occurs. This chapter is central to the thesis of this book that exploitation of buyer power is more difficult to control than abuse of seller power even as it is as pervasive as, or more pervasive than, seller power.

Chapter 6 evaluates the use of market regulations outside conventional competition law to minimize the harms that buyer power can cause. Such regulations are common responses in many market-oriented economies and seem particularly common for addressing the abuse of buyer power. But such regulations, especially as they focus on specific business relationships, carry risks to the competitive process because they can rigidify markets and undermine the valuable dynamics that come from innovation. Any specific regulation invites evasion and so may have only limited utility; moreover, such regulations tend to invite those who gain advantage from them to lobby for their enhancement and expansion beyond what is needed to protect the competitive process itself.

Chapter 7 reviews the law and policy governing buying cartels and buyer groups, and Chapter 8 provides a similar analysis of the standards used when mergers lead to significant buyer power. In combination these two chapters show that it is feasible to have competition policies that control the creation of buyer power by clear and consistent structural standards and specific prohibitions on certain kinds of buying arrangements. By controlling the creation of undue buyer power, the problems identified in Chapters 5 and 6 with directly regulating the unilateral abuse of such power are avoidable in significant part.

Chapter 9 concludes that the best policy for dealing with buyer power is to control its creation rather than to rely on rules to regulate its use. But because buyer power can and does exist in ways that are not parallel with seller power, different metrics, measures and criteria need to be used to ensure that the competitive process on the buying side of the market works fairly and equitably. Chapter 9 also considers how the globalization of markets creates issues for the enforcement of rules against buyer power abuse. Conduct in developed countries can cause serious harm in developing countries that may leave competition authorities in both jurisdictions unable to respond effectively.

This overview should end with a couple of caveats. First, despite the resolute effort to take a global perspective on the issues of buyer power, there is an unavoidable emphasis on the American experience. This emphasis derives, first, from the author’s own background, which is in American competition policy issues generally and buyer power issues in particular. Second, American competition policy has addressed some issues of buyer power for well over a century. Indeed, a major element in the agitation that led to the Sherman Act was the concern of farmers with the buyer power of meat packers, grain elevator operators and other downstream buyers. As a result, there is a longer and broader experience with buyer power and its control in America than in any other country.

The second caveat is that any effort to synthesize a great range of materials and observations carries a tendency to abstract and generalize in ways that may gloss over important qualifications and limitations of the analysis. The reader should know that the author is aware of the problem and that every effort has been made to acknowledge the limits of the claims and the proposed analyses. The thesis of this book is that buyer power creates pervasive and serious risks to the competitive process, but the overall effect may be to suggest that any exercise of buyer power is somehow anticompetitive and undesirable. Again, every effort is made to qualify such a tone. Still, the cautious reader may want to keep a salt shaker at hand.

Finally, there is no question that competition policy overall must address both buyer and seller power. I contend, however, that there is already in place a vigorous and effective competition policy to control undue seller power. Therefore, this book addresses the need to do the same for buyer power.

1 Roger Blair and Jeffrey Harrison, Monopsony in Law and Economics (Cambridge University Press, Cambridge 2010) 1–14.

2 The National Farmers Union reports that, as of October 2014, farmers and ranchers received a little less than 16 cents of every dollar spent on food. See National Farmers Union (31 October 2014), ‘Farmer’s Share of Retail Food  Dollar’, available at http://www.nfu.org/images/103114_Farmers_Share.pdf.

3 For more detailed examinations of the impact of buyer power on American agriculture see Christopher Leonard, The Meat Racket (Simon and Schuster, New York 2014) and Wenonah Hauter, Foodopoly (The New Press, New York 2013). A counterargument praising the restructuring of the meat processing industries is found in Maureen Ogle, In Meat We Trust: An Unexpected History of Carnivore America (Houghton Mifflin Harcourt, Boston 2014).

4 According to the United States Department of Agriculture, ‘[i]n 2012, the average age of principal farm operators was 58.3 years, up 1.2 years since 2007, and continuing a 30-year trend of steady increase. The older age groups all increased in number between 2007 and 2012.’ US Department of Agriculture (February 2014), 2012 Census of Agriculture, US Farms and Farmers, available at http://www.agcensus.usda.gov/Publications/2012/Preliminary_Report/Highlights.pdf.

5 Oklahoma Attorney General Opinion No. 01-17 (11 April 2001), available at http://www.oscn.net/applications/oscn/DeliverDocument.asp?CiteID=212530. See also Leonard, supra note 3, at 231–3.

6 See, eg, Olivier De Schutter (2010), ‘Addressing Concentration in Food Supply Chains: The Role of Competition Law in Tackling the Abuse of Buyer Power’, available at http://www.srfood.org/images/stories/pdf/otherdocuments/20101201_briefing-note-03_en.pdf (hereinafter De Schutter, ‘Concentration’); Olivier De Schutter (2009), ‘Report of the Special Rapporteur on the Right to Food 5’ (‘Concentration in buying markets is particularly worrying, and even more so than concentration in selling markets, because dominance in buying markets can be achieved with a relatively small market share …’), available at http://www2.ohchr.org/english/bodies/hrcouncil/docs/13session/A-HRC-13-33.pdf (hereinafter De Schutter, ‘Report’); Traidcraft and South Centre (2008), ‘Rebalancing the Supply Chain: Buyer Power, Commodities and Competition Policy’, available at http://unctad.org/Sections/ditc_ccpb/docs/ditc_ccpb0009_en.pdf.

7 See, eg, Bananalink, The Problem with Bananas, available at http://www.bananalink.org.uk/the-problem-with-bananas (last visited 10 March 2016); UN Conference on Trade and Development (2008), ‘Cocoa Study: Industry Structures and Competition’, available at http://unctad.org/en/Docs/ditccom20081_en.pdf. See generally Agricultural Accountability Initiative, ‘Power Buyers, Power Sellers: How Supermarkets Impact Farmers, Workers and Consumers—and How We Can Build a Fairer Food System’, available at http://www.ase.tufts.edu/gdae/pubs/rp/aai_issue_brief_3.pdf.

8 An exception is the Ghana Cocoa Marketing Board. See Ghana Cocoa Board, https://www.cocobod.gh/index.php (last visited 3 March 2016).

9 De Schutter, ‘Concentration’, supra note 6.

10Ibid at 2 (footnotes omitted).

11 Economists generally assume that when income increases the recipient spends less than all of the increase. See, eg, Don Patinkin, Money, Interest, andPrices (Harper and Row, New York 2nd edn 1965) 206 (‘marginal propensity to demand commodities out of real income is assumed positive, but less than unity’).

12 See Fleischman v Albany Med. Ctr., 728 F. Supp. 2d 130 (N.D.N.Y. 2010); Reed v Advocate Health Care, 268 F.R.D. 573 (N.D. Ill. 2009); Cason-Merenda v Det. Med. Ctr., 862 F. Supp. 2d 603 (E.D. Mich. 2012).

13 See Final Judgment, United States v Adobe Sys. (D.C.N. Cal. 2011), available at http://www.justice.gov/atr/cases/f272300/272393.htm.

14 In re High-Tech Emp. Antitrust Litig., 856 F. Supp. 2d 1103 (N.D. Cal. 2012) (upholding the complaint against a motion to dismiss).

15 In re High-Tech Emp. Antitrust Litig., 2014 WL 3917126 (N.D. Cal. Aug. 8, 2014) (denying proposed settlement as inadequate).

16 In re High-Tech Emp. Antitrust Litig., 2015 WL 5159441 (N.D. Cal. Sept. 2, 2015) (final approval of revised settlement).

17 Darrell Miller, ‘The Thirteenth Amendment and the Regulation of Custom’ (2012) 112 Columbia Law Review 1811, 1833.

18 See Aravind R Ganesh, ‘The Right to Food and Buyer Power’ (2010) German Law Journal 1190; Editorial, ‘Fire Safety in Garment Factories’ New York Times (10 December 2012) at A26, available at http://www.nytimes.com/2012/12/10/opinion/fire-safety-in-garment-factories.html.

19 See, eg, Traidcraft (2014), ‘Cashing in on Cashews’, available at http://www.traidcraft.co.uk/media/3bed9565-4d1b-4ccc-a76e-3381b986c9c4.

20 See Hauter, supra note 3, at 68–73; United Food and Commercial Workers (2010), ‘Ending Walmart’s Rural Stranglehold’, available at https://grist.files.wordpress.com/2010/09/ag_consolidation_white_paper2.pdf?. Cf Tom Angotti, Brian Paul, Tom Gray and Dom Williams (2010), ‘Wal-mart’s Economic Footprint: A Literature Review Prepared by Hunter College Center for Community Planning and Development and New York City Public Advocate Bill De Blasio’, available at http://www.hunter.cuny.edu/ccpd/repository/files/walmart.pdf.

21 John B Kirkwood, ‘Collusion to Control a Powerful Customer: Amazon, E-Books, and Antitrust Policy’ (2014) 69 University of Miami Law Review 1, 8–9; Markus Brauck, Wolfgang Höbel and Claudia Voigt, ‘An Amazon Problem: The Book Is Dead, Long Live the Book’ Spiegel Online International (15 March 2013), available at http://www.spiegel.de/international/zeitgeist/rise-of-amazon-and-ebooks-force-german-publishers-to-reinvent-selves-a-888679.html.

22 See ‘Oakley Settles Suits Against Luxottica’ Bloomberg News (22 May 2003), available at http://articles.latimes.com/2003/may/22/business/fi-oakley22 (reporting that Oakley settled its patent infringement case with Luxottica). Three years later Oakley sold out to Luxottica after Luxottica excluded its lines from its retail outlets. See Olivia Fleming, ‘Why DO Designer Glasses Cost More than an iPad? The Eyewear Company with “Total Domination” Setting Astronomical Prices’ Daily Mail (9 October 2012), available at http://www.dailymail.co.uk/femail/article-2215287/Luxottica-The-eyewear-company-total-domination-setting-astronomical-prices.html.

23 See Adaptive Power Sols. v Hughes Missile Sys., 141 F.3d 947, 952–3 (9th Cir. 1998) (the only two buyers of a missile part colluded to refuse to deal with one of the two manufacturers, but the court of appeals held that the claim made ‘no economic sense’ and refused to impose liability). See also Christopher Leslie, ‘Rationality Analysis in Antitrust’ (2010) 158 University of Pennsylvania Law Review 263, 334–6 (2010) (criticizing the decision in Adaptive Power for ignoring the rational gains to the buyers of establishing a willingness to destroy suppliers).

24 The older cases include United States v Griffith, 334 U.S. 100 (1948) (use of buyer power to exclude competition by bundling movie license locations); Shine Chain Theaters v United States, 334 U.S. 110 (1948) (same facts as Griffith); recent examples of the same conduct include Cobb Theatres III v AMC Entm’t Holdings, Inc., 101 F. Supp. 3d 1319 (N.D. Ga. 2015) (upholding complaint charging a conspiracy to exclude a smaller theater chain from the market by exclusive dealing contracts with a competing major chain). See also Jared Klaus and Jay Levine (3 June 2015), ‘Antitrust Probe of Movie Theater Chains Enters Next Act’ Antitrust Law Source, available at http://www.antitrustlawsource.com/2015/06/antitrust-probe-of-movie-theater-chains-enters-next-act/; Eriq Gardner, ‘AMC Can’t Escape Antitrust Lawsuit Over Distribution of Studio Movies’ Hollywood Reporter (23 March 2015), available at http://www.hollywoodreporter.com/thr-esq/amc-cant-escape-antitrust-lawsuit-783762.

25 See, eg, United Kingdom (2009), ‘The Groceries Supply Code of Practice’, available at https://www.gov.uk/government/publications/groceries-supply-code-of-practice. The Australian Competition and Consumer Commission has interpreted the Australian Consumer Law to authorize challenges to unconscionable conduct by major buyers. See Press Release (22 December 2014), ‘Court Finds Coles Engaged in Unconscionable Conduct and Orders Coles Pay $10 Million Penalties’, available at https://www.accc.gov.au/media-release/court-finds-coles-engaged-in-unconscionable-conduct-and-orders-coles-pay-10-million-penalties.

26 Walmart is the largest buyer for a number of major brands and has shown the capacity to force its suppliers to do its bidding, including absorbing many transaction costs without price increases. See Hauter, supra note 3, at 68–73.

27 See ibid at 71.

28 See Alwyn Scott and Tim Hepher, ‘Boeing Slows Payments to Suppliers as It Accelerates Cost Cutting’ Reuters (7 July 2016), available at http://www.reuters.com/article/us-boeing-suppliers-idUSKCN0ZN1GG.

29 Suppliers with sufficient resources often acquire firms in related fields to diversify the risks they face. See Harriet Jones, ‘Connecticut Aerospace Companies Face Technological Leap’ WNPR (7 May 2014), available at http://wnpr.org/post/connecticut-aerospace-companies-face-technological-leap (supplier of parts to United Technologies had acquired five other businesses within the past year as part of its effort to increase its size).

30 In American poultry production, the grower must have expensive buildings for raising the birds. A buyer can vary its output in response to market conditions by controlling when it takes delivery of flocks of birds without incurring the fixed costs of the vast complex of facilities necessary for raising them. In a more competitive market, growers would demand assurances that their fixed costs would be covered as a condition of incurring the initial investment. See generally Leonard, supra note 3, at 23–5, 67–8, 71.

31 Others, including Robert Lande, have argued that maximizing total surplus is not the overarching goal of antitrust law and that the law should seek to prevent firms from achieving market power without justification or by taking the wealth of consumers or small producers. See Robert H Lande, ‘Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged’ (1982) 34 Hastings Law Journal 65; Robert H Lande and John B Kirkwood, ‘The Fundamental Goal of Antitrust: Protecting Consumers, Not Increasing Efficiency’ (2008) 84 Notre Dame Law Review 192. As discussed in Chapter 2 this position confuses rather than clarifies the goals of competition law because it starts from an economic theoretical perspective but then qualifies it with a market process concern.

32 See OECD, ‘Policy Roundtable: Monopsony and Buyer Power’ DAF/COMP(2008) 38, 141–301, available at http://www.oecd.org/dataoecd/38/63/44445750.pdf.

33Ibid.

34 European Commission, Green Paper on Unfair Trading Practices in the Business-to-Business Food and Non-Food Supply Chain in Europe, COM(2013) 37 final, available at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52013DC0037&from=EN.

35Ibid at 12–14, 16–17.

36 Competition Committee, Roundtable on Competition Issues in Food Chain Industry 6–8, DAF/COMP/WD(2013)105, available at http://ec.europa.eu/competition/international/multilateral/2013_oct_food_chain_industry_en.pdf; European Commission (2014), ‘The Economic Impact of Modern Retail on Choice and Innovation in the EU Food Sector’, available at http://ec.europa.eu/competition/publications/KD0214955ENN.pdf.

37 European Commission, Tackling Unfair Trading Practices in the Business-to-Business Food Supply Chain 2, COM(2014) 472 final, available at http://ec.europa.eu/internal_market/retail/docs/140715-communication_en.pdf (‘This Communication does not foresee regulatory action at EU level …’).

38 See generally Albert O Hirschmann, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States (Harvard University Press, Cambridge, MA 1970) (when groups can no longer exit from a relationship they will seek to have a voice in it).

39 Federal Trade Commission and Department of Justice (2010), ‘Horizontal Merger Guidelines’, available at https://www.ftc.gov/sites/default/files/attachments/merger-review/100819hmg.pdf.

40 Thomas J DiLorenzo, ‘The Origins of Antitrust: An Interest-Group Perspective’ (1985) 5 International Review of Law and Economics 75.

41 See, eg, Ariel Ezrachi and Maria Ioannidou, ‘Buyer Power in European Union Merger Control’ (2014) 10 European Competition Journal 69; Kirkwood, supra note 21; Maurice Stucke, ‘Looking at the Monopsony in the Mirror’ (2013) 62 Emory Law Journal 1509; ‘Symposium: Buyer Power and Antitrust’ (2005) 72 Antitrust Law Journal 505. My own contributions include ‘Buyer Power, Competition Policy, and Antitrust: The Competitive Effects of Discrimination among Suppliers’ (2008) 53 Antitrust Bulletin 271; ‘Buyer Cartels versus Buying Groups: Legal Distinctions, Competitive Realities, and Antitrust Policy’ (2010) 1 William and Mary Business Law Review 1; and ‘Buyer Power and the Horizontal Merger Guidelines: Minor Progress on an Important Issue’ (2012) 14 University of Pennsylvania Business Law Journal 775.

42 See, eg, Richard Scheelings and Joshua D Wright, ‘“Sui Generis”?: An Antitrust Analysis of Buyer Power in the United States and European Union’ (2006) 39 Akron Law Review 207.

43 Roger Blair and Jeffrey Harrison, Monopsony: Antitrust Law and Economics (Princeton University Press, Princeton, NJ 1993).

44 Blair and Harrison, supra note 1.

45 Roger Clarke, Stephen Davies, Paul Dobson and Michael Waterson, Buyer Power and Competition in European Food Retailing (Edward Elgar Publishing, Cheltenham, UK and Northampton, MA, USA 2002).

46 Alan Manning, Monopsony in Motion: Imperfect Competition in Labor Markets (Princeton University Press, Princeton, NJ 2003); Roger Noll (ed), Government and the Sports Business (The Brookings Institute, Washington, DC 1974). See also Gerald Scully, ‘Pay and Performance in Major League Baseball’ (1974) 64 American Economic Review 915.

47 See John M Crespi, Tina L Saitone and Richard J Sexton, ‘Competition in Farm Product Markets: Do Long-Run Incentives Trump Short-Run Market Power?’ (2012) 34 Applied Economic Perspectives and Policy 669 (contending that the long-run interest of buyers will keep them from exploiting suppliers). Although ‘excessive exploitation’ is unlikely if buyers take a long-run perspective and see no likely replacement for the exploited supplier, it is not obvious that buyers as a class have or even can have such a well-informed, long-run, non-strategic vision and commitment.