Under dual distribution a manufacturer sells through both independent and vertically integrated channels of distribution. The hybrid nature of these arrangements has led to persistent questions in antitrust relating to the use and effects of dual distribution restraints. To date, two schools of antitrust thought have emerged. Recent changes in the law, together with the growing use of dual distribution in practice, have called attention to these questions and the views of the two schools. Addressing both, the relevant literature from business research and practice are gathered and examined. The findings support aspects of each school, but challenge others, especially those that address free riding, in important ways. Together the findings augment extant understanding of dual distribution restraints in antitrust.

Since Oliver Williamson published Markets and Hierarchies, transaction cost economics (TCE) has claimed an important place in antitrust, avoiding the extremes of the structuralist school, which saw market structure as decisive, and the Chicago school, which found monopoly only infrequently and denied that a monopolist could leverage its power into related markets. Since the 1970s both the structuralist and Chicago positions have moved toward the center, partly as a result of TCE. Already in 1978 Areeda and Turner produced the first volumes of the Antitrust Law treatise, which completely repudiated the leverage theory and abandoned the structuralist and leveraging positions on vertical integration. TCE analysis of contractual restraints recognizes that an important threat to competition is double marginalization, which can occur when market power is held by separate firms with complementary outputs. Nevertheless, one comparative advantage of both structuralism and the Chicago school was their simplicity. TCE analysis is more specific to the situation, demanding close scrutiny when significant market power is either present or realistically threatened.

Many standard setting organizations (SSOs) promote coordinated industry-wide investments in technologies that may be patented. If these investments are sunk before implementers become aware of the patents, or obtain some assurance of a reasonably priced license, the patentee will have a very strong bargaining position. The resulting hold-up problem may lead to higher prices and reluctance to implement new standards. This article describes steps that many SSOs take (or might take) to mitigate patent hold-up and discusses public policies that can strengthen or weaken the private initiatives of SSOs to deal with the problem of potential hold-up.

This article looks first at the process courts use to resolve merger challenges and finds that in the area of product market definition, merger analysis is reasonably strong. Market definition remains complex and subjective, however, and could be improved, or avoided altogether, through econometric techniques such as merger simulation. Judicial analysis of entry is much weaker. Courts ask whether the market is protected by entry barriers but rarely ask whether the barriers are high enough to make entry unprofitable. The article also examines the results of “marginal” mergers, mergers that would have been blocked had the government and courts been somewhat more aggressive. Measured in this way, merger analysis is not seriously off target: the merger retrospectives find that very few transactions led to sharp price changes. They also find, however, that a large proportion of marginal mergers resulted in small price increases, which suggests that in appropriate cases, enforcement agencies and courts should be more willing to predict anticompetitive effects.

This article compares the level of fines actually imposed on cartel participants to the illicit gains captured by the firms and estimates a range of optimal restitution and dissuasive fines in each case. The results show that the fines imposed against cartels by the European Commission are, overall, moderate, regardless of the probability of detection. The article is based on a sample of sixty-four cartel decisions by the European Commission from 1975 to 2009 and a methodology that estimates optimal fines imposed on cartels on a case-by-case basis.

With the effectiveness of the revision of the Swiss Cartel Act on April 1, 2004, the Competition Commission (the COMCO) gained considerable new powers, especially the power to sanction anticompetitive behavior by imposing substantial fines. Additionally, the revision provided the COMCO with enhanced means of gathering evidence of competition law infringements by conducting dawn raids, thereby increasing the probability of detection and punishment for competition law infringements. Both steps together aimed at strengthening the deterrent effect of antitrust sanctions. Against this background, the article investigates to what extent the revision has reached its goal by conducting a survey among Swiss antitrust lawyers and firms. The results show that the revision certainly has strengthened the deterrent effect of antitrust sanctions in Switzerland. However, in some areas, greater specificity of the legal provisions is advisable in order to increase legal certainty and to avoid negative effects on social welfare by deterring procompetitive behavior.

This article extends the single-market measure of market power to a multimarket setting in order to develop the concept of effective market share—what the market share of the hypothetical, single-market firm would have to be to exercise the same degree of market power as the actual, multimarket-dominant firm. This approach yields four main findings. First, traditional market power measures tend to overstate (understate) market power in the case of net complements (substitutes). Second, cost complementarities compound the effects of demand complementarities in tempering the dominant firm's market power. Third, the errors in measuring market power are asymmetric: policy makers are more likely to conclude that market power is present when it is absent than to conclude that market power is absent when it is present. Fourth, effective market shares facilitate more reliable inferences about market power and hence fewer errors in adjudicating merger and deregulation cases.

The transgenic seed industry provides an ideal case study of major competition policy and antitrust enforcement questions associated with systems. These systems consist, at a minimum, of upstream markets for genetic traits (e.g., herbicide-tolerance and insect-resistance) and downstream markets for traited seeds. Corn, soybeans, and cotton are particularly important crops on which transgenic innovations have had an impact. The article begins by discussing the remarkable nature of the transgenic seed revolution, the role of innovation, and the importance of patent protection. It moves on to examine how rapid consolidation has created systems with significant vertical and horizontal integration. These sections help establish the framework for examining two major types of systems—open and closed. Such systems are defined primarily by whether the combinations or “stacks” of genetic traits contained in traited seed involve the technology of a single firm or multiple firms. They give rise to two major modalities of competition—intrasystem and intersystem rivalry. In transgenic seed, the presence of a dominant firm has arguably had a major influence on the evolution of these modalities, particularly through licensing policies for patented technology. The article highlights the difficult questions associated with the nexus between intellectual property law and antitrust law. Some progress is evident, however, as illustrated by landmark antitrust enforcement actions that address system issues.