October 20 Wednesday

Antitrust in Thin Markets, Hiba Hafiz, Boston College Law School

  • Wednesday, October 20, 2021 at 12:00PM - 1:30PM
  • Online
  • Open To The Public
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“Thin” markets are markets with few active participants on the buy- or sell-side, which reduces liquidity and the volume of sales. Thin markets are problematic for at least two reasons. First, lower liquidity makes efficient buyer-seller matches more challenging. And second, thin markets are prone to firm dominance and collusion on either side of the market, creating adverse price and quality effects while limiting innovation and market growth in the longer term. Market regulation has primarily focused on the former problem in, for example, financial markets (such as those for municipal bonds), due in no small part to the impacts of the financial crisis and resulting instability in those markets.

But competition problems generated by thin markets have gone largely unaddressed. This is particularly concerning because market thinness raises concerns in two recent, high-profile areas of antitrust attention—Big Tech and labor markets—where dominant platforms and local employers in distressed and rural labor markets unilaterally dictate the volume and terms of trade to their benefit. Regulating thin markets is especially challenging for competition policy because antitrust law alone can do little to remedy harms to counterparties and downstream actors where low exchange volume or liquidity give nascent, fringe, or potential market actors limited economic incentives to enter and compete. Existing antitrust doctrine has either dealt clumsily or with resignation to this problem—mostly acceding to antitrust defendants’ anticompetitive conduct as contextually justified acts in failing industries or by “failing firms”. But applying that treatment to Big Tech and labor markets threatens to exacerbate the harms of firm and employer dominance while failing to encourage market restructuring in ways that could “thicken” markets and profoundly increase micro- and macroeconomic efficiencies, innovation, and growth.

This Article is the first to uncover and address the problem of antitrust regulation in thin markets. It argues that, because thin markets are characterized by market failures that competition rules and remedies alone cannot fix, antitrust must partner with broader, more interventionist regulatory efforts to restructure and regulate market exchange. While it focuses on Big Tech and labor markets, the Article has important ramifications for antitrust regulation in a wide range of industries, including financial, real estate, agricultural, commodity, and energy markets, to name a few. It draws from examples of successful market “thickening” outside of the antitrust setting to propose a range of regulatory solutions to competition-related problems in thin markets.   

Email heather.branch@yale.edu for the llink

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