How to explain the basic idea of antitrust

Last week I gave a presentation on antitrust trainings in an expert session (yes, I like the topic, see also my previous blog). One participant pointed out that one should catch people with antitrust examples from their everyday life to explain the general idea behind antitrust laws and why antitrust matters (and is of course great). I am also of this opinion and thus reflected a bit on where I used such examples in the past and also where additional examples can be found. The results are summarized in this blog.

A basic understanding of how competition (and collusion) works

A real classic, although the original version (hopefully) has no relevance in people’s everyday life, is the prisoner’s dilemma. I suppose most people (and of course all readers of this blog) have heard from the prisoner’s dilemma: Two prisoners are accused of committing a crime, they are questioned individually and cannot communicate with each other. If both deny the crime, both receive a very low sentence, since they can only be proven to have committed a less severely punished crime. If they both confess, they both receive a high penalty for it, but not the maximum penalty because of their confession. If, however, only one of the two prisoners confesses, he will go unpunished as a key witness, while the other one will receive the maximum penalty since he did not confess but can be convicted because the other prisoner confessed.

The prisoner’s dilemma can be used to explain a lot of what matters in antitrust: What would change if prisoners (competitors) could coordinate? They would likely agree not to confess. What would happen without coordination – probably both would confess (compete). How does the scenario change if both meet each other repeatedly and each other’s behaviour is transparent (for example, in an oligopolistic market)? How can cooperation (a cartel) lead to profit maximization for both participants but not for other market participants? Admittedly, the prisoner’s dilemma is rather complex, and one should therefore carefully consider how and where to use it in trainings (or in blog posts).  

The one which is a classic one

A classic to explain the very basics of antitrust is, of course, the ice cream parlor case (optionally also in the variants kebap / pizza / price for a tourist menu). Here, it can be vividly explained why in antitrust law a difference is made between an agreement / coordination and the mere adaptation of a certain conduct. Occasionally, such cases even make it into the press (as recently in Austria here). In addition, the audience often feels addressed, because the experience that in some places no competition exists adapting a certain market behaviour from each other works rather well, seems to be widespread. Other classics are the non-existent (or never proven) agreements between petrol stations (see our detailed blog here). 

The one which excites everyone

And now to a real insider’s tip: Surprisingly, kitchen and furniture cases often strike a chord with the audience. The question “how would you like it if you pick up an offer in kitchen studio A and want to obtain a comparative offer from B but A calls B beforehand to make sure that B does not undercut A” seems to get people very excited. All of a sudden, everyone understands why antitrust makes sense and everyone agrees that the kitchen studios are behaving unfairly (inter alia) here. Apparently, everyone can identify with this situation (which for me raises the question of how often some people buy new kitchens). The kitchen example can also be helpful explaining geographic market definition (how far would you drive to buy a kitchen).

The one for gourmets

Certainly not a case for short and crisp antitrust trainings, but still one of my favourites when it comes to market definition, market power and refusals to deal is the United States Supreme Court case Aspen Skiing Co. v. Aspen Highlands Skiing Corp. The story of the four Aspen ski areas and the all-Aspen ticket is easy to digest and is a good starting point for facilitating discussions.   

What does not work

Any scenarios in which small companies coordinate their activities at the expense of a larger company seems to be acceptable for people. Here, many listeners assume that it must be permissible to fight back when the balance of power is too unequal (David vs. Goliath thus seems deeply embedded in our basic thinking). The gas station cases will probably not work as well in the future when there are no more cars with combustion engines.

Key messages

Probably everyone has their own favourite cases with which they try to explain the goals of antitrust law, and rightly so. Either way, it is helpful if you can convey to the audience why antitrust is important and what the basic idea behind antitrust is. This often facilitates the discussion and is likely to raise the audience’s attention with regard to antitrust law. However, the more the cases move away from the basic idea of antitrust law, the faster the audience’s understanding seems to diminish. But I assume this is no different for us practitioners.

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