Should Economic Theory Control Price Fixing Analysis?

Abstract:     
At first glance, lawyers remain in control of price fixing analysis. Agreements to raise price are per-se illegal, and economists only seem needed to estimate damages. However, economic insights remain relevant; not all price-related agreements are driven by pricing issues and some price agreements are inferred from the totality of the evidence. If recent research is an indicator, economists would like to further expand their influence. In a series of papers, Kaplow proposes to reincarnate Posner’s focus on economic evidence, and prove liability with market performance data. Such an approach would expand price fixing policy to cover situations of tacit collusion (conscious parallelism). Kovacic, Marshall, Marx, and White, as well as Harrington, advance limited reforms, with Kovacic et al. suggesting a method to quantify the Plus Factor concept, and Harrington introducing a theoretical method to develop Plus Factor evidence. This paper provides an analysis of the current price fixing standard, evaluates the applicability of these new economic modeling structures, and highlights areas for future research. By abandoning the concept of agreement, Kaplow’s concept eliminates an institutional check on over-aggressive antitrust enforcement and runs the risk of allowing serious policy errors. On the other hand, all the authors offer useful insights to supplement the standard Plus Factor approach and economic ideas could improve policy at the margin. Going forward, the integration of law and economics, implicit in the current case law, is likely to continue.

Number of Pages in PDF File: 55

Keywords: antitrust, price fixing, plus factors, Posner, per-se standard

JEL Classification: K21, L12, L41

working papers series