by Michael D. Whinston. Cambridge, MA: MIT Press, 2006. 261pp. Hardcover. $30.00/£19.95. ISBN: 9780262232562.
Reviewed by Kasturi Moodaliyar, Oliver Shreiner School of Law, University of Witwatersrand, South Africa. Email: kasturi.moodaliyar [at] wits.ac.za.
This book is comprised of a series of lectures that to serve as an introduction to the economics incorporated into antitrust law. Michael D. Whinston caveats that the lectures do no strive to be comprehensive in their coverage. He focuses on some of the most recent developments in antitrust economics, and more specifically on issues that are complex, problematic and those that require further research.
The book comprises a combination of law and economics which starts off on an intermediate level. Whinston begins with an introduction to US antitrust laws, which is a well examined insight that will appeal to readers with basic to advanced knowledge of the subject. Quite early on in the introduction, he describes the collusive behaviour of firms, using economic reasoning. Although this might scare some lawyers, the equations are quite understandable and easy to follow. The book is well-structured, and the remainder of the book is organised into three main chapters.
Chapter 2 covers one of the most unsettled areas of antitrust with which many jurisdictions have tried to grapple for decades. This chapter offers an in-depth discussion on price fixing, which involves agreements among competitors to restrict output or raise prices. In this chapter Whinston tries to unsettle the discourse a bit, suggesting that economists know less about price fixing than they think, and he tackles some significant and challenging questions. He gives a good review of the legal treatment of price fixing before addressing the empirical evidence of actual effects.
Chapter 3 examines horizontal mergers, in which competitors agree to combine their operations. This is a problematic area, as horizontal mergers may result in the removal of an effective competitor from the market. Merger analysis involves a balancing test, to determine whether there is a substantial reduction of competition and whether there are any efficiencies arising from the new arrangement. Horizontal mergers have seen some of the most significant advances over the last 10-15 years. In this chapter, Whinston summarizes the main issues in evaluating the horizontal merger phenomenon. He pays particular attention to these recent advances, while also discussing some important unresolved questions.
In Chapter 4 there is a shift of focus to vertical agreements. Firms in a vertical relationship are at different levels of the supply chain. The chapter begins with an introduction to the economics of exclusionary vertical contracts, another controversial area of antitrust. The resultant effect of exclusive contracts is [*576] to exclude rivals and thereby reducing competition. Whinston refers to it as one of the “purest forms of exclusionary vertical contracts.” This is an area of antitrust that has received very little systematic empirical attention; however, there has extensive theoretical work recently. Focusing specifically on exclusive contracts, the author attempts to explain the source of the controversy and to describe recent theoretical advances.
To sound a note of caution, Whinston presents only a limited discussion of the empirical evidence to support the theoretical framework on exclusive vertical agreements. The topic of exclusive vertical contracts is rather restricted in itself, and a full discussion should include aspects, such as vertical mergers and tying, predatory pricing, as well as intrabrand vertical restraints and collusive facilitating practices.
There has to be a perimeter in the focus one has when authoring a book, and Whinston draws his around these three very narrowly focused topics. This selective choice of concentration leaves out a number of important issues that a more extended treatment ideally would discuss. This is certainly not a text steeped in antitrust case law and legal considerations. As the title suggest, the discussion is limited to primarily an economic perspective and there is only a passing mention to the legal treatment of these practices. The volume would have struck an optimal balance if it did have a greater, more meaningful legal discussion to complement the empirical economics.
The book also has a limited geographic reach, as it focuses exclusively on the antitrust laws in the United States. However, the economic principles applied in the three areas that are covered extends well beyond geographical boundaries. Any antitrust jurisdiction would relate to the examples Whinston presents.
Whinston’s intended audience is primarily graduate students in economics and practicing economists (both academic and non-academic) with interest in antitrust policy. This book will also appeal to antitrust lawyers, academics and graduates who wish to pursue a more economic theoretical approach to the issues. The author says that he has tried to confine some mathematics to footnotes and to ensure that his central line of argument can be followed without necessarily understanding every equation that appears in the body of the text. This consideration is apparent and makes for effortless reading.
LECTURES ON ANTITRUST ECONOMICS is a well-written and researched book with contemporary examples that would appeal to any reader with an interest in the developments of antitrust economics. The book is an insightful contribution to the field.
© Copyright 2007 by the author, Kasturi Moodaliyar.