Presented at the 2nd annual LL.M. Conference at Cornell Law School on April 16, 2005.
B2B is a business-to-business market place that uses internet to connect each other business. It has gotten a lot more attention recently in Japan as well as in the U.S. because it is possible to lower the procurement costs of raw material and accomplish several procompetitive effects such as communication efficiencies. However, in spite of these pro transactional natures of B2B, it could also cause anticompetitive effects on market place. In other words, the fact that buyers communicate easily through the internet means they could easily form a cartel or conclude an agreement to restrain the free competition and it is easy to detect deviation from those agreements. There must have been buyers’ anticompetitive agreements long before B2B and these agreements were concluded without using the internet-based communication. However, the potential for B2B to aid buyers’ agreements is worth to get attention. Despite this importance, there have been little cases and studies concerning buyers’ agreement even in the U.S. and, in Japan, there have been neither cases nor the detail examination by the governmental agencies about buyers’ anticompetitive agreements. This is because traditionally sellers have had a strong bargaining power over purchasers. Therefore, little attention has been focused on anticompetitive effects which might be caused by buyers’ agreements. The internet, however, drastically changed the bargaining power balance between sellers and purchasers. It has made possible for purchasers to form a cartel to decrease the input purchased and lower the price through the web-based communication. The paper examines the competitive aspects of B2B from the view point of the antitrust law and analyzes oligopsony, that is, buyers’ collusion to exercise their market power to decrease the price of the products they are going to buy from suppliers by depressing the quantity of input purchased artificially. Drawing on microeconomic theory and antitrust law, the interdisciplinary work in the paper explores the implications of oligopsony, or buying power, for antitrust policy. The paper offers a systematic treatment of the topic, demonstrating that whether or not oligopsony power exists because of a dominant buyer or collusion among buyers, it can cause social welfare losses analogous to those occasioned by monopoly. The paper also discusses bilateral monopoly and offers a principled basis for distinguishing between socially desirable and undesirable cooperative buying. In addition, the paper analyzes the legal response to an oligopsony agreement in the U.S. as well as in Japan in order to examine how an oligopsony agreement should be treated. Further, the paper discusses tangential facts and circumstantial evidence to find an oligopsony agreement, because, in the antitrust practice, whether or not it is possible to find an agreement is sometimes the decisive point. The paper tries to provide the practical precepts to find an agreement which would be concluded on B2B.
Date of Authorship for this Version
Inoue, Akira, "Antitrust Analysis of B2B Transaction" (2005). Cornell Law School Inter-University Graduate Student Conference Papers. Paper 7.