Trademarks as Sources of Market Power: Drugs, Beers and Product Differentiation

Abstract

This Article defines the notion of market power and how in conjunction with trademark rights give rise to elements that are deemed anticompetitive in a free market society. This Article uses legal arguments to consider how important developments in antitrust economics, particularly product differentiation and monopolistic competition, have contributed to the notion that trademarks are a source of market power. The Article uses a number of cases in the field of trademarks to underscore the key points that trademarks are a source of market power. These case developments contribute to the monopolistic tendencies of trademarks and describe how such tendencies are associated with the theory on market power and product differentiation. Empirically, the Article examines beer products from a single large corporation and the various trademarks/brands to determine whether such brands are a source of market power, effectively giving that manufacturer a monopoly on the beer market. A discussion of product hopping in pharmaceuticals is used to supplement the theories and evidence from the beer market. The Article also develops a theory of branded monopoly and suggests that, as a result of single ownership of trademarks and brands that are abundant from a single owner trademark's market power, questions relating to antitrust foreclosure are often raised, despite the fact that market power is not anticompetitive per se. If it is recognized that trademarks are a source of market power, and hence, a core concern for antitrust law and policy, then the legal foundations of the current trademark system would need a radical redesign. If, on the other hand, it is recognized that trademarks are a source of market power, but do not conflict with antitrust law, and antitrust enforcers are to ignore conducts such as market foreclosure and other barriers to entry as a result of excessive trademarks and brands, then both antitrust and trademark law can continue to co-exist in the current system. 2017] TRADEMARKS AS SOURCES OF MARKET POWER 165Vol. 35, No. 2 (2017) I. FRAMING THE INQUIRY-MARKETS AND MONOPOLIZATIONTo what extent is a trademark a source of market power? Does market power flow from monopoly power in trademarks? If trademarks are a source of market power-does it affect the antitrust regime? What is the nature of market power versus monopoly power? Should market power be presumed with trademarks? These are some of the questions that can affect the dynamics of how trademarks operate within our competitive economy. These very same questions also raise broader law and policy issues on the interaction of trademarks and antitrust. It is against this background that this Article seeks to investigate the claim that trademarks are a source of market power. It is a basic, yet controversial, claim given that the trademark system is unique within the realm of the intellectual property system.The question as to whether trademarks are sources of market power has been raised on different occasions; 1 however, the goal of this Artic...

The impact of trademark intensity on firm performance: Unraveling the role of product market competition, total factor productivity, and SG&A efficiency

“…Trademarks can play a crucial role. Intense competition drives firms to differentiate their products and innovate to gain a competitive edge (Morris, 2016). We expect that, under growing product market competition, higher trademark intensity will improve performance.…”

Trademarks and the Economic Dimensions of Trademark Law in Europe and Beyond

“…But some of the major works on the economic analysis of trademark law emerged in the late 1980s with those by Landes and Posner ( 1987) and Economides ( 1988) and then other contributions by scholars such as Lunney ( 1999), Ramello ( 2006, Barnes ( 2006), andGriffiths ( 2011). In recent times Morris (2017), for instance, looks at some of the ways in which trademarks contributes to market power through the product differentiation thesis. These approaches to the economic dimension of trademark law incorporate the economic analysis of law.…”

“…It is also useful, when discussing economic approaches of trademark law to consider other areas competition law. This is because empirical evidence suggests that trademarks are anticompetitive, for example, by serving as tying products (Smirti 1976) or due to their inherent exclusivity or market power (Morris 2012(Morris , 2017, and whether such exclusivity is being abused by trademark owners.…”