Introduction

Brands have been all but ignored in antitrust. Informed by theory from neoclassical economics that finds that product differentiation, including that achieved through branding, yields ambiguous effects for economic efficiency, a widely held view is that “product differentiation merits special attention in antitrust only in limited circumstances.” Yet an emerging view is that product differentiation deserves more attention and greater concern when it involves brands and brand management. Contending that neoclassical economics is limited in its capacity to fully comprehend the power of brands and citing the recent proliferation of prominen brands in the economy, scholars have called for re-examination of this marketing practice in antitrust. These calls counsel that to fully understand the nature and implications of brands, antitrust must integrate insights from other fields including business theory and research.

This state of affairs provides the impetus for the current chapter. Our goal is to draw on insights from marketing thought and practice to investigate the implications of contemporary branding and brand management for antitrust. To accomplish this, we first summarize the understanding of product differentiation in neoclassical economics that has led to the conclusion that brands are of limited concern to antitrust. Our attention then turns to key features of modern branding and brand management as developed in the marketing literature. Our review of this literature identifies several insights for antitrust. These include:

1. (a) that consumer purchase choices combine complex bundles of tangible and intangible benefits and brands capture the meaningful differences reflected in the competing bundles of these benefits for consumers;

2. (b) that marketers employ sophisticated strategies of brand management to symbolize and communicate the differentiated value of products and services; and

3. (c) that successful brand management yields brands that possess significant value for the organizations that own them and considerable loyalty on the part of consumers who patronize them.

Drawing on the above insights we clarify views in antitrust concerning brands and then further develop them to better understand the implications of powerful brands for antitrust. Our effort reinforces the opinion of scholars who have called for greater attention to brands in antitrust. First, we describe how consumers make purchase choices based upon aspects of products that go well beyond their functional utility. This clarifies that brands are not an “artificial” form of product differentiation, but instead communicate meaningful differences to consumers that in turn influence their purchase decisions. This understanding reinforces the idea that powerful brands can affect consumers’ perceptions of competition. Second, we show that brands are an integral part of a firm's marketing efforts. This establishes that brands are not a way to “move beyond” marketing, but rather are fundamental to it. This insight bolsters the view that branding is an important and consequential competitive practice. Third, we explain how a powerful brand can decrease interbrand competition, but at the same time increase intrabrand competition.