The Measurement of Monopsony Power

Date01 March 1992
Published date01 March 1992
DOI10.1177/0003603X9203700106
Subject MatterArticle
The Antitrust Bulletin/Spring 1992
The measurement
of
monopsony
power
BY
ROGER
D. BLAIR* and JEFFREYL. HARRISONu
I.
Introduction
133
For
the
most
part, competitive abuse by buyers-s-monopsonyt-c-
has
been ignored in the antitrust casebooks2and texts.3Antitrust
* Huber Hurst Professor of Business and Legal Studies, University
of Florida, Gainesville.
UProfessor of Law, University of Florida, Gainesville.
AUTHORS' NOTE: Although we have benefited from the helpful comments
of
Richard E. Romano, he must be held blameless
for
what follows. We
appreciate thefinancial support
of
the College
of
Business Administration
and the College
of
Law at the University
of
Florida.
1Formally, monopsony exists only when there is a single buyer. As
an antitrust matter, monopsony is present when a single large buyer's
purchasedecisionsinfluenceprice.
2For a notable exception, see R.
POSNER
&F.
EASTERBROOK,
ANTITRUST
146-50 (1981), for their treatmentof monopsonistic price fix-
ing. They do not, however, deal with monopsony in other contexts.
3Both R.
BLAIR
&D.
KASERMAN,
ANTrrRUST
EcONOMICS
178,309-11
(1985), and H.
HOVENKAMP,
ECONOMICS
AND
FEDERAL
ANTITRUST
LAW
17-18 (1985), touch on monopsony but fail to provide a comprehensive
analysis of the law or theeconomics.
C 1992by Fodcnl
Lesal
Public.tiona, Inc.
134 : The antitrust bulletin
scholars similarly have ignored monopsony as well.s But we are
becomng increasingly aware
of
monopsonistic abuses.
Consider
the following examples: tuna canneries in California have
been
accused
of
fixing
purchase
prices
at
artificially
low
levels,"
antique dealers have rigged bids in public auctions," the owners
of
major league baseball teams have colluded in their dealings with
free agents," and movie theaters split the films among themselves
and thereby alter the licensing arrangement in their favor.! In
each
instance, we have monopsony power? being used to advance the
interests
of
buyers at the expense
of
sellers.
As a result
of
this behavior,
monopsony
is
beginning
to be
analyzed. Jacobson and Dorman have made a substantial contribu-
tion to
our
understanding
of
joint buying activity in their provoca-
tive artlcle.v In addition to setting
out
the economic analysis
of
joint
buying arrangements and the current case law, they propose
an analytical structure for the antitrust handling
of
joint
purchas-
.. In part, this may be explained by the empirical belief that monop-
sony is rare. See, e.g., 4P. AREEDA &D.
TuRNER.
ANTITRUST
LAw
, 964b
(1980).
5Eagle v. Star-Kist Foods. Inc.• 812 F.2d 536 (9th Cir. 1987). The
plaintiffs in this case were fishermen who were paid by vessel owners on
a price per ton of fish caught basis. Since the plaintiffs were employees
of the vessel owners. their injuries were derived from those suffered by
the vessel owners. On that basis, they were denied standing.
6United States v, Howe. Crim. No. 87-00262. E.D. Pa.• 7/21/87.
7
Baseball
Owners
Conspired
to
Shut
Down
Market
for
Free
Agents, Arbitrator Rules, Wall St. J., September 22. 1987, at 10. col. 1.
The major league baseball players negotiated away their rights to sue
under the antitrust laws and, therefore. must rely upon arbitration to
redress grievances due to alleged antitrust violations.
8Balmoral Cinema v, Allied Artists Pictures, 885 F.2d 313 (6th Cir.
1989).
9Monopsony power refers to the ability of a large buyer to influ-
ence price and other terms by adjusting its purchases.
10 Jacobson &Dorman, Joint Purchasing, Monopsony and Antitrust.
36 ANTITRUST Buu., 1 (1991). In addition. see Blair &Harrison. Antitrust
Policy and Monopsony. 76
CORNELL
L.
REv.
297 (1991).

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