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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 4: The potential competitive harms from the existence and abuse of buyer power

A Global Issue

Peter C. Carstensen

Extract

This chapter describes the harms to competition that can result from the abuse of buyer power. It starts with an analysis of harms resulting from exploitation that include depressed prices, discrimination among producers, uncompensated shifting of risks and costs to producers and the potential that the harms will flow upstream to suppliers of the supplier. It then describes the exclusionary harms that buyer power can cause to competitors of the buyer both as buyers and in any downstream markets where they compete. These practices include exclusive contracts, inducing refusals to deal by producers, most favored nation type clauses in buying contracts and predatory buying practices that increase the cost of inputs to competitors of the buyer. The final part of the chapter argues that abuse of buyer power generally and monopsony in particular is more harmful to the competitive process than is abuse of monopoly.

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