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69 Antitrust L.J. 195 (2001)
The Sherman Act's Unintended Bias against Lilliputians: Small Players' Collective Action as a Counter to Relational Market Power

handle is hein.journals/antil69 and id is 203 raw text is: THE SHERMAN ACT'S UNINTENDED BIAS
AGAINST LILLIPUTIANS: SMALL PLAYERS'
COLLECTIVE ACTION AS A COUNTER TO
RELATIONAL MARKET POWER
WARREN S. GRIMES*
The Sherman Act's framers thought they were crafting a statute against
abusive concentrations of economic power. An interpretation that penal-
izes individually practicing doctors, small farmers, small franchisees, or
other small players would have been unacceptable to the drafters. Yet
that is how the Act'sjurisprudence has evolved. Large, oligopolistic firms
can wield power strategically, targeting less powerful rivals, customers,
or suppliers. A natural response of such targeted firms is to seek counter-
vailing power. Businesses that wish to merge to create bargaining leverage
are free to do so as long as industry concentration thresholds are not
exceeded. But if small players either cannot or, for legitimate business
reasons, will not consolidate, Section 1 of the Sherman Act, because of
its strong proscription on cartel conduct, stands in the path of collective
action that could allow the exercise of countervailing power. Unless the
small firms can establish an efficiency defense,' collective action will be
subject to the per se rule governing horizontal combinations. The small
players will suffer a market-power based transfer of wealth, and quality
and selection of goods or services will likely decline. In sum, competition
is undermined at the direct expense of a small business or professional,
a result that is anathema to Sherman Act goals.
Small players are uniquely vulnerable to the relational market power
that arises when substantial financial and other commitments are made
in reliance on a commercial relationship.' A right to act collectively in
* Irwin R. Buchalter Professor of Law, Southwestern University School of Law, Los
Angeles, Cal. I am grateful to Lawrence Sullivan, Christopher Cameron, Robert Lande,
and ajournal referee who read earlier drafts of this work and provided useful comments.
The per se rule does not apply to horizontal combinations that allow for the sale of
a new product or otherwise generate substantial efficiencies. See the line of cases discussed
infra Part II.B.
2 Relational market power is explained infra Part I.A.

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