Excluding people, from business opportunities when you yourself, are in a dominant position, is called market foreclosure. And it can get you into deep trouble, with competition authorities. So, watch out, because they are different versions of market foreclosure. So what are, different forms of market foreclosing, and why does it matter? Well, anything that cements the current market structure, will be a form of market foreclosing. In other words, anything that makes it more difficult for others to enter, for firms to enter, and change the status quo, will be, a, strategy of foreclosing the market. And of course, if you are a dominant firm, you have especially a strong interest, in keeping the market structure it is, which means that if, as a dominant firm, you foreclose the market, you basically, abuse your current dominant position. Which is why, it's often viewed with suspicion, by antitrust authorities. Now, the first form of, market foreclosure is exclusive dealing. And, with exclusive dealing, we're basically looking at a situation where firms will sign procurement contracts, which forbid the other party to sell to, or buy from competitors. So, looking at petrol stations, for example. They will always purchase their petroleum, their petrol from the same supplier, which means that you basically have a branded petrol station which can only purchase their petrol from a particular, supplier. So, second form, of market foreclosure, is tying. And here, a firm makes the, purchase of one product over which it has market power, conditional on purchasing a second product, over which it has no market power. In other words, which is competitively supplied. What does that mean? It means that you will only get one product, is you also buy a second product that you would otherwise. Only it might also buy from a competitive supplier. So, for example, the Apple iPhone, was exclusively available in the US, if, with the purchase of an AT&T mobile contract. This meant that, people were viewing the AT&T an AT&T contract, as pretty much interchangeable with any other supplier, but f they wanted an iPhone, they had to sign up with AT&T. So they had the tie in between, a contract with AT&T and the Apple iPhone. A third form of, market foreclosure is bundling. So here you offer two or more products, and it has market power over just one, separately, but you give a discount to consumers who purchase those as a combined bundle. So, as an example here, if we have a popular song, and you make that available only on an album, which of course, also contains many other songs that you may or may not want to buy as a consumer, but if you want that one song really really urgently, you're going to have to buy the album. Another form of, keeping the market structure as it is, is simply by pricing in a predatory way. This means that you've set prices at a level, that implies the losses for you in the short run, but in the long run you're going to eliminate competitors, you drive competitors out of the market and realize monopoly profits. So, as an example here, the Times in the UK was for a while charging prices that were at marginal cost or possibly even below marginal costs to drive other newspapers out of the market. The final form of market foreclosure is by simply refusing to supply, or supplying at a price that makes it unattractive for other competitors to be active in the market. So, the company here, the company with market power, refuses to supply competitors with essential input. Or, it sells these inputs at a price, that is going to make it impossible for competitors to make a profit. And, I think that's best explained using an example here. So Deutsche Telekom, were operating, the telephone and the internet backbone in Germany. And they also owned the local loop, which meant that they owned the connection to the end consumer. They of course, also provided DSL services, so fast Internet services to subscribers, but they also, lease out their lines, their DSL lines to rivals. Now, the point here was that DSL was rented out to competitors at prices that were so high, that basically rivals, didn't find it possible to make profit anymore, and the European commission found this to be illegal, and they fined Deutsch Telecom 12,000,000 Euros. An example of tying, or refusal to supply is Microsoft. Microsoft, as we all know, has been dominating the market for operating systems for several decades. And this in itself, is not illegal. What's legal, and remember that, what's legal is not to be a monopolist, but it is to basically abuse a monopolistic position, to abuse a dominant position. And so, one of the many episodes was that, the operating system at some point came with the Microsoft Media Player. And that was at a time when, other media players were already becoming, fairly powerful in the market. So Microsoft also provided competitors with poor information, about software interfaces necessary, that they needed to engineer applications that worked smoothly with Windows. In other words, they were giving an advantage an advantage to internal software developers, vis-a-vis third party developers, which made it easier for internal software to internally develop software, to become more powerful and therefore also to give a dominant position in Microsoft in other markets. Now, the European Commission ended up fining Microsoft almost half a billion Euros, and now forced the company to offer a Windows version without the media player pre-installed. So that was, had the goal of making easier for other media players, to come into the market and basically be installed on Microsoft Windows. And after I run a video quiz, let's me, meet again for the wrap up. Congratulations. You've made it through yet another video. And we'll see each other, in the following wrap up. [BLANK]
