The Economics of Refusals to Deal
30 May 2007
By former NERA Vice President Dr. Robert Rubinovitz
Since 1919, legal and economic analyses of unilateral refusals to deal with a competitor have turned to a passage in United States v. Colgate & Co., where it was made clear that the Sherman Act "does not restrict the long recognized right of [a] trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal." However, notwithstanding the recognition that a firm has no general obligation to aid its rivals, the issue is still hotly contested as a refusal to cooperate with competitors can, in some circumstances, be viewed as anticompetitive conduct.
In this chapter from Economics of Antitrust: Complex Issues In a Dynamic Economy, former NERA Vice President Dr. Robert Rubinovitz offers a perspective on the difficult issues that are often encountered when evaluating the competitive consequences of access requirements and allegations involving refusals to deal. On the one hand, an access requirement has the potential to create a platform that may enhance product competition in the near term. On the other hand, such a requirement could stifle firms' incentives to make needed investments in research and development that may stimulate competition in the future. Thus, economic analyses of these issues must take a longer-term view, particularly with respect to investment incentives and the possibility that access requirements could chill future innovation and investment.
