“But collective action among competing advertisers to dictate brand safety standards to be applied by social media platforms shortcuts the competitive process and allows the collective views of a group of advertisers with market power to override the interests of consumer,” the complaint said.
Hmm.
The article doesn’t give the specifics, but it sounds like the claim is some kind of antitrust thing. Like, advertisements are something that companies purchase. If many companies engage in some kind of collusion to limit the price at which they will buy something or quantity that they buy, I suppose that that might potentially violate antitrust law – you’re basically forming a buyer’s cartel. I don’t recall ever hearing of advertisements being the target of this, though. Usually it’s an input specifically to the good in question. And I don’t know for sure to what degree buyer’s cartels are restricted by antitrust law in the US.
A cartel is a group of competitors who have agreed to limit or eliminate their competition in some economically relevant dimension. The objective of such a combination is to create, allocate, and exploit power in the market. While conventional monopsony theory posits primarily exploitive explanations, i.e. collusive, or unilateral conduct to reduce input prices, buyer cartels can also use their collective power to exclude or restrain their competitors in the markets in which they buy goods or otherwise regulate the nonprice dimensions of the supply market as a means of entrenching their own dominance in both upstream and downstream markets.5 A buyer cartel eliminates competition for input purchases. Buyers may collude even though they sell in highly competitive markets where seller cartelization is unlikely. Such buyer collusion may eventually reduce the total output in the market. A significant reduction in output can affect the downstream market by reducing the volume of the output produced, resulting in higher prices for the remaining production.
B. Legitimate Buying Groups
A buying group is a set of potentially competing buyers that pool their purchase orders and jointly or through an agent negotiate for the inputs they seek. The fundamental distinction between a legitimate buying group and a cartel is that a buying group acts to gain the efficiencies of a joint enterprise. The buyer-participants have integrated some of their input acquisition function by participating in the buying group. Efficiencies can result from longer production runs, reductions in transaction costs, or lower costs per unit of quality control, and can include protection against defective or dangerous products, preferred status with shipping services based on high volume, and improved ability to develop new products. In addition, buying cooperative can bargain for better prices. A buyer seeking a large volume is likely to make a more extensive search of the market for suppliers and generate a more active bidding process as a result. Therefore, in a market where competition is imperfect but workable, buyers can gain a price advantage by employing more sophisticated and effective searches for the inputs they need.
C. Distinguishing Buying Groups from Cartels
There are no fixed parameters for a buying group. A legitimate buying group involves some integration of activities, but it is limited to facilitating the functioning of the enterprise. One way to distinguish a buying group from a buyer cartel is to focus on its functional goals. If the participants make an investment in, and consolidate, coordinate, and administer some aspects of their buying activity, then they are prima facie a buying group. Conversely, if the group exists only to agree on how the parties will conduct their own purchases, it is prima facie a cartel.
Well, at least based on that criteria – which is from an article on buyer’s cartels, not quoting antitrust law – that sounds like a coordinated advertising boycott by companies might well be illegal in US law, that Twitter might have a case.
That being said, even if it’s illegal as it stands, I can’t help but think that it might also be possible to structure something very similar to that in a way that is legal. For example, suppose that multiple companies go to an entity providing brand management consulting, and that entity says to a number of companies who are its clients “advertising on Twitter may be a bad idea for your brand”. Those companies don’t have a binding obligation to follow that advice, but do follow it. I can’t imagine that that would be illegal. I mean, I can imagine that maybe Twitter might win this lawsuit, but not really do much to change what’s happening in terms of purchasing of advertising.
I’ll also add that just on the grounds that companies who are customers of a supplier are unlikely to be very happy with that supplier if it sues them, I’d guess that they’re likely to find a way not to do business with that supplier in the future, regardless of the route they take.
Hmm.
The article doesn’t give the specifics, but it sounds like the claim is some kind of antitrust thing. Like, advertisements are something that companies purchase. If many companies engage in some kind of collusion to limit the price at which they will buy something or quantity that they buy, I suppose that that might potentially violate antitrust law – you’re basically forming a buyer’s cartel. I don’t recall ever hearing of advertisements being the target of this, though. Usually it’s an input specifically to the good in question. And I don’t know for sure to what degree buyer’s cartels are restricted by antitrust law in the US.
kagis
https://www.competitionpolicyinternational.com/wp-content/uploads/2021/06/1-Buyer-Cartels-Defining-Appropriate-Competition-Policy-By-Peter-C.-Carstensen.pdf
Well, at least based on that criteria – which is from an article on buyer’s cartels, not quoting antitrust law – that sounds like a coordinated advertising boycott by companies might well be illegal in US law, that Twitter might have a case.
That being said, even if it’s illegal as it stands, I can’t help but think that it might also be possible to structure something very similar to that in a way that is legal. For example, suppose that multiple companies go to an entity providing brand management consulting, and that entity says to a number of companies who are its clients “advertising on Twitter may be a bad idea for your brand”. Those companies don’t have a binding obligation to follow that advice, but do follow it. I can’t imagine that that would be illegal. I mean, I can imagine that maybe Twitter might win this lawsuit, but not really do much to change what’s happening in terms of purchasing of advertising.
I’ll also add that just on the grounds that companies who are customers of a supplier are unlikely to be very happy with that supplier if it sues them, I’d guess that they’re likely to find a way not to do business with that supplier in the future, regardless of the route they take.