James M. Fesmire

A note on vertical market foreclosure

The judicial fear of vertical market foreclosure has been criticized severely in the academic literature. The focus of this criticism isnot that foreclosure is impossible; rather, it is that foreclosure is not a profitable business strategy. In this note, we show that this criticism is not valid under conditions of partial ownership. If effective vertical control can be achieved with partial ownership, vertical market foreclosure can be used to increase the partial owners profits. We use theduPont (GM) litigation as a vehicle to explore this point.

Applying the rule of reason to maximum resale price fixing: Albrecht

The imposition and social welfare consequences of maximum resale price fixing are analyzed when there is successive monopoly and a non-contractible service is provided downstream. An elasticity condition that weighs maximum resale price fixings opposing effects on quantity, through the effects on final price and service provision, determines whether it is adopted. Wholesale price is increased along with the practice of resale price fixing, and the net effects on quantity and social welfare are ambiguous. This points to an output test and a rule of reason in the antitrust evaluation of this practice, consistent with the Supreme Courts overruling of Albrecht.