The 'No Collusion' Rule

Abstract

Federal courts have largely permitted “tacit collusion,” the process by which companies use public announcements, investments, and algorithms to raise prices or depress wages without ever coming to an explicit agreement with one another. This has an enormous impact on consumers, on workers, and on democracy as a whole. But barring an unexpected reinterpretation of the Sherman Act at the Supreme Court, those who hope to prevent tacit collusion must find new tools to do so.

This Article proposes one such tool: rulemaking at the Federal Trade Commission. A “No Collusion” Rule would prevent a firm from raising its prices solely because a competitor has done so. Under the rule, the FTC would be empowered to bring enforcement actions against those who engage in such unfair methods of competition. Defendants could defeat these actions by showing that their price in-creases were not solely motivated by their competitors’ parallel behavior.

In proposing the rule, this Article fills an important gap in the academic literature. A long line of scholarship beginning with Richard Posner has examined the problem and forms of tacit collusion, but to date, no one has deeply considered FTC rulemaking as a means to address it. More recently, advocates of the “Neo-Brandeisian” or “hipster” school of antitrust have revived interest in FTC rulemaking, but so far no one has offered a specific proposal like the one here. This Article connects and extends these disparate lines of scholarship and as such will be of keen interest to both academics and policymakers as antitrust law gains re-newed national attention.

This Article proceeds in three parts. Part I describes the twinned problems of increasing industry concentration and tacit collusion, and how federal courts have largely declined to address them. Part II proposes the “`No Collusion Rule,” and both describes the rule itself and how it would be implemented. Part III addresses five key objections, namely that the FTC lacks authority to promulgate the rule, that the rule is unnecessary, that it is too broad (or too narrow), that it is impossible to administer, and that tacit collusion is good.

Note: The opinions in this Article are my own and do not reflect those of the Department of Justice. The discussion that follows is based solely on public information learned outside my government service.

Keywords: antitrust, tacit collusion, rulemaking, FTC