MIT Sloan Management Review

Business Ethics and Public Policy, Marketing

 

When Marketing Practices Raise Antitrust Concerns

By Darren Bush and Betsy D. Gelb

July 15, 2005

Many common marketing activities are coming under greater scrutiny from regulators, lawyers and scholars. Companies are scrambling to figure out how that will affect competition.

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Antitrust laws can give managers a sobering dose of reality — even managers who believe they are obeying the laws. These days, most business-people know better than to sit down with competitors to fix prices or divide markets, and most are alert to the perils of pricing below cost until competitors fail. However, when considering core marketing issues such as distribution policy, line extensions or joint marketing agreements, or even when trying to enhance the company’s “good citizen” image, they may not realize the growing likelihood of violating antitrust laws. They are especially likely to do so when their brands hold dominant market shares.

The issue is particularly sensitive in the United States, where longtime federal statutes such as the Sherman Antitrust Act are being interpreted with economic rigor. But it applies outside the United States as well; for instance, the European Union’s directives are taking a harder line with antitrust interpretations. For the purposes of this article, we will refer only to U.S. situations.

While marketing practices received increased antitrust scrutiny beginning in the late 1990s,1 a series of events in the early 2000s has reinvigorated the legal thinking regarding marketing concerns and antitrust. There is little debate that the new emphasis is due to significant changes in business practices concerning promotion, sales and distribution. The retail sector’s category management is one... To read the complete article, login or sign-up using the form below.

 
 

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