Nonprice Competition

• DOI: 10.1177/0003603X9303800103
• Published date: 01 March 1993
• Date: 01 March 1993
• Subject Matter: Article

The Antitrust Bulletin/Spring 1993

Nonprice competition

BY DOUGLAS H. GINSBURG·

83

The role

of

nonprice competition has not received enough atten-

tion in antitrust analysis. Legal scholars and judges have occa-

sionally

acknowledged

nonprice

competition

with

a nod and

perhaps even a kind word about the social utility

of

nonprice com-

petition, but they quickly return to the more familiar subject

of

price competition.' The Supreme Court no doubt understated mat-

ters in its 1966 opinion in GeneralMotors when it said that "The

protection

of

price competition

...

is an object

of

special solici-

tude

under

the

antitrust

laws."

Although

nonprice

vertical

restraints, such as the territorial and other conditions that a manu-

*

Judge,

United

States

Court

of

Appeals

for

the

District

of

Columbia Circuit and Visiting Professor, George Mason University Law

School.

AUTHOR'S NOTE: The author is grateful to Jonathan B. Baker, Michael

Boudin. Jon M. Joyce, and Robert H. Lande

for

comments on an earlier

draft

of

this artie/e.

This is not to say that courts or commentators have failed to

appreciate that an agreement to fix a nonprice term of trade is analyt-

ically indistinguishable from an agreement to fix price. See, e.g., Cata-

lano, Inc. v, Target Sales, Inc., 446 U.S. 463 (1980). Rather, it is the

potential for nonprice competition that they have slighted in analyzing

the danger of cartelization in a particular market.

C 1993 by Federa! Lega! Publications. Inc.

84 : The antitrust bulletin

facturer may place upon its dealers, have played aprominent role

in the case law concerning distribution since the Supreme

Court's

GTE

Sylvania-

decision

in

1977,

the

significance

of

nonprice

competition for the analysis

of

collusion among competitors has

been

generally ignored.'

In this article, Ihope to alter that imbalance a

bit

by analyzing

the effect

of

nonprice competition on collusion

among

competi-

tors. My hypotheses are that nonprice competition is a widespread

and powerful inhibition to collusion, and that larger firms are par-

ticularly unlikely to overcome the barrier to collusion

that

non-

price competition poses.

I.

Background

Modern

antitrust

law-by

which

I

mean

antitrust

as it

was

reconceived

in

academic

circles

during

the

1970s

and

imple-

mented in government

enforcement

policy during the

1980s-is

concerned primarily with the problem

of

collusion.

The

govern-

ment

generally combats collusion in two ways that are legally dis-

tinct

but

linked

by

economic

analysis.

First,

the

government

suppresses cartels directly. The Sherman Act makes price fixing

illegal

per

se;4 any express agreement among competitors to

set

the

prices

or

other

terms on

which

they will

offer

or

sell

their

2Continental T.V. v, GTE Sylvania, 433 U.S. 36 (1977). Those

cases are collected and analyzed in Ginsburg, Vertical Restraints: De

Facto Legality Under the Rule

of

Reason, 60

ANTITRUST

L.J. 67 (1991).

The one exception in the case law is E.!. DuPont de Nemours &

Co. v, FTC, 729 F.2d 128 (2d Cir. 1984), vacating Ethyl Corp., 101

F.T.C. 425 (1983), of which more below. Elzinga, New Developments on

the Cartel Front, 29

ANTITRUST

BULL.

3,24

(1984), notes that FTC Chair-

man James Miller's dissent in Ethyl, later to be vindicated in the court of

appeals, "contains a cogent discussion" of nonprice competition. As is

characteristic of the literature, however,Elzinga does not pursue the sub-

ject; indeed he introduces his one-page discussion of nonprice competi-

tion as "a footnote" "while on the subject of price."

4See Shennan Act §1, 15 U.S.C. §1; Albrecht v, Herald Co., 390

U.S. 145(1968).