Competition Policy and Price Fixing
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Throughout the world, the rule against price fixing is competition law's most important and least controversial prohibition. Yet there is far less consensus than meets the eye on what constitutes price fixing, and prevalent understandings conflict with the teachings of oligopoly theory that supposedly underlie modern competition policy.
Competition Policy and Price Fixing provides the needed analytical foundation. It offers a fresh, in-depth exploration of competition law's horizontal agreement requirement, presents a systematic analysis of how best to address the problem of coordinated oligopolistic price elevation, and compares the resulting direct approach to the orthodox prohibition.
In doing so, Louis Kaplow elaborates the relevant benefits and costs of potential solutions, investigates how coordinated price elevation is best detected in light of the error costs associated with different types of proof, and examines appropriate sanctions. Existing literature devotes remarkably little attention to these key subjects and instead concerns itself with limiting penalties to certain sorts of interfirm communications. Challenging conventional wisdom, Kaplow shows how this circumscribed view is less well grounded in the statutes, principles, and precedents of competition law than is a more direct, functional proscription. More important, by comparison to the communications-based prohibition, he explains how the direct approach targets situations that involve both greater social harm and less risk of chilling desirable behavior--and is also easier to apply.
in trade associations occurred in the United States in the decades following passage of the Sherman Act. In Britain, it appears that information sharing arrangements were often successful, especially before they were subject to stricter scrutiny. See Swann et al. (1974, 158–63). 54 See Connor (2007a, 11, 143–44, 295–96). 55 See Fraas and Greer (1977, 39–42), Hay and Kelley (1974, 21–22), and Levenstein and Suslow (2008, 1123). 56 This idea is discussed further in note 56 in chapter 7. Among
problem of chilling effects. It is also useful to examine the particular problem of controlling coordinated oligopoly pricing with attention to different enforcement stages. For initial identification of cases to investigate more thoroughly, agencies might, in addition to relying on buyer complaints and informants, employ economists who would study industry data on pricing, market shares, and the like, as well as features bearing on the ease of coordination, to identify where violations are most
invasion, if there are many small territories and only a few would be entered at a time, then only small defections may be possible secretly (in the sense of advance preparations), so it might be fairly easy to effectuate cooperative restraint. 29 One may combine price and nonprice evidence, and one may look for patterns in nonprice behavior. Suppose, for example, that firms all reduce capacity at about the same time. Such behavior might reflect coordination, but it could (and often would)
reversals of positions elaborated in section 6.B would be frequent, even typical, rather than exceptional, which seems contrary to what ordinarily occurs in adjudication. 24 Regarding how one should, in principle, set the proof burden under the communications-based approach, compared to under the direct approach, see the latter portion of section C. 18 Further Topics A. Sanctions The subject of optimal sanctions is considered in chapter 13. Discussion here focuses on differences
self-interest would refer to actions that would not be taken unless other firms’ cooperation was specifically obtained by illegal rather than legal modes of communication (note the same reservation). And poor economic performance would mean worse performance than would result from legal interdependence. Each of these restatements is logically possible. Nevertheless, the formulations seem strained. They also replicate the inference problem stated in subsection 1. Specifically, what evidence would