The Interface between Competitive Market Signaling and Antitrust Law

Abstract

The authors examine the antitrust implications of certain market behavior, using recent findings from research on competitive market signaling. They show that certain behavior of a firm that is sometimes thought to raise antitrust concerns should be viewed as a natural and permissible facet of competitive interplay in the market. Conversely, they identify other market behavior that should be viewed with much more caution due to the antitrust risks of such behavior. The authors offer new perspectives on the motives and intentions that drive market behavior but may or may not raise antitrust concerns. They also show how competitive signaling research holds considerable promise for a better understanding of when serious antitrust issues are or are not triggered by particular market actions.

Limiting Product Choice: Innovation, Market Evolution, and Antitrust

“…The dominant firm might not expect any such fighting brands to succeed. Instead, it merely wants to confuse the marketplace enough to injure a smaller innovator and perhaps bring the innovator to a division of market if the signals are clear enough (Heil and Langvardt 1994). For example, when Folgers entered East Coast markets in the 1970s, General Foods, owner of the top East Coast coffee, Maxwell House, signaled its disapproval in several ways, including the introduction of a fighting brand, packaged to look like Horizon, which previously had been test marketed and failed.…”

Signaling Type and Post‐IPO Performance

“…Similarly, this study looks at the impact of signaling on capital market participants (investors), and future studies can examine how signals like underwriter reputation influence labor market participants like potential employees. Another fruitful area of inquiry is the idea of competitive market signaling, including how IPO signals elicit competitive reactions from rivals based on how they perceive the acting firm's motives and intentions, and how strategic signaling can be used for collusion among competitors (Heil and Langvardt, ).…”

Product Strategy and Antitrust: A Consumer Choice Perspective

“…However, a firm that launches a new product only to attack a rival offering and with no intent to consider making the new product a legitimate offering risks antitrust condemnation. In fact, it may be signaling a proposed market division (Heil and Langvardt ). For example, in the 1970s, Folgers brand coffee decided to enter the East Coast markets.…”