David Evans, May 20, 2011
This article examines antitrust analysis when one of the possible subject products of an antitrust or merger is ordinarily offered at a zero price. It shows that businesses often offer a product for free because it increases the overall profits they can earn from selling the free product and a companion product to either the same customer or different customers. The companion product may be a complement, a premium version of the free product, or the product on the other side of a two-sided market. The article then shows how antitrust and merger analysis should proceed when the subject is either the free product or the companion product. A key point is that the existence of a free good signals that there is a companion good, that firms consider both products simultaneously in maximizing profit, and that commonly used methods of antitrust analysis, including market definition, probably need to be adjusted to properly analyze two inextricably linked products. When antitrust or merger analysis involves a free product, the analysis of consumer welfare and injury also needs to account for customers of both the free product and its companion product since any change in market conditions for customers of one product affects the customers of the other product. Much of the analysis of the article is also relevant to other common situations in which price is set less than marginal cost.
Links to Full Content
Featured News
Uruguayan Antitrust Scrutiny Puts Major Meatpacking Deal Between Marfrig and Minerva on Hold
May 19, 2024 by
CPI
Alaska Airlines Seeks Dismissal of Consumer Lawsuit Over $1.9 Billion Hawaiian Airlines Buy
May 19, 2024 by
CPI
Idaho Attorney General Orders Split of Kootenai Health and Syringa Hospital
May 19, 2024 by
CPI
Court Rejects T-Mobile’s Appeal Bid in Antitrust Case Over Sprint Merger
May 19, 2024 by
CPI
Google Requests Judge, Not Jury, to Decide on Antitrust Case
May 19, 2024 by
CPI
Antitrust Mix by CPI
Antitrust Chronicle® – Ecosystems
May 9, 2024 by
CPI
Mapping Antitrust onto Digital Ecosystems
May 9, 2024 by
CPI
Ecosystems and Competition Law: A Law and Political Economy Approach
May 9, 2024 by
CPI
Ecosystem Theories of Harm: What is Beyond the Buzzword?
May 9, 2024 by
CPI
Open Ecosystems: Benefits, Challenges, and Implications for Antitrust
May 9, 2024 by
CPI