The Law and Economics of Planned Obsolescence: A Transatlantic Antitrust Investigation

Research project

Valerio Cosimo Romano

This research aims to canvass the antitrust theory and practice behind planned obsolescence, the industrial policy of purposely designing a product with a limited life-span. Despite the primary role that product durability plays in shaping innovation and in defining quality standards, planned obsolescence has not yet been thoroughly examined through the lens of law and economics. The first part of the research will define and categorize planned obsolescence and its practice, which is possibly motivated by functional, aesthetic, technological, or logistical reasons. It will also describe and compare the legal solutions implemented thus far by U.S. and EU regulators. The second part of the research will focus on the theory of planned obsolescence in different scenarios, such as in monopolistic, oligopolistic, and competitive markets. This part of the research will look to find the optimal degree – if one exists – of substitution for aging products. In greater detail, this research will evaluate the theoretical justifications for planned obsolescence, both from the producerist and the consumerist views of the market. Accordingly, it will address the monopolist’s tension between the desirability of reducing durability in order to reap monopoly profits and the threat of encouraging entry in the market by competitors or harming its own sales. The research will also examine the consumers’ likely reaction. The article will then move to oligopoly and address the oligopolists’ incentive to collude in order to reduce durability to an inefficient level; as a side-effect, it will also consider the threat to the stability of the cartel posed by the increased frequency of interactions in the market. In addition, it will explore how planned obsolescence is expected to fare in a reasonably competitive scenario. The third part will highlight the pros and cons of the practice. The fourth part will then discuss the measures through which planned obsolescence can be regulated. Beyond the radical suggestions of a tout court ban or deregulation of planned obsolescence, it will analyze different technical, legal, and commercial measures which might inspire sound antitrust policy in the U.S. and the EU. Finally, the fifth part will conclude the research. This research is anticipated to fill a niche in the antitrust literature, contributing to the implementation of consistent regulatory measures for U.S. and EU industries.