‘Market Power in Antitrust: Economic Analysis after Kodak,’ by Benjamin Klein
In 1992, the U.S. Supreme Court held in Eastman Kodak Co. v. Image Technical Services that a firm without market power in photocopiers might still possess market power in photocopier parts and service. The Court’s logic turned on opportunistic hold-up: Kodak could profit by trading short-run exploitation of locked-in customers for long-run losses in equipment sales. That tradeoff, the Court concluded, could establish antitrust market power.
Benjamin Klein’s 1993 article, “Market Power in Antitrust: Economic Analysis after Kodak,” alls this a category error. Hold-up is real; Klein helped define it in “Vertical Integration, Appropriable Rents, and the Competitive Contracting Process” (1978), co-authored with Robert Crawford and Armen Alchian.
But hold-up is not market power. The Court took the framework Klein helped build and pressed it into service for a task it was never meant to perform.
That misstep carries a broader lesson for law & economics. The Court in Kodak relied on sound economic concepts—hold-up, switching costs, lock-in—but aimed them at the wrong legal question. Law & economics demands more than importing good economics into legal disputes. It requires matching the right economic concept to the right legal question. Klein’s contribution lies in doing exactly that—and in understanding both sides well enough to know the difference.