Should Private Exchanges of List Price Information Be Presumed to Be Anticompetitive?
24 Pages Posted: 13 Jul 2022
Date Written: June 30, 2022
Harrington (2021) considers whether—based on economic theory—an agreement between competitors to exchange list price information can be presumed to harm competition. In support of the affirmative, he provides a novel narrative and supporting theoretical analysis based on the premise that, once list prices are set, adjusting them is difficult but not too difficult. Taking into account the novelty of this theory and its relevance for recent competition cases, we consider it useful to explore its potential limitations. We show that both the scope for and magnitude of harm are sensitive to key modelling parameters such as the number of firms, the degree of product substitutability, and the level of marginal cost—sometimes in opposite directions. We also show that there may be no scope for the anticompetitive effect when firms are capacity constrained. Finally, we discuss several qualitative aspects that may undermine the theory of harm: the adaptability of internal pricing processes over time, the lack of verifiability of exchanged list price information, and possible procompetitive or competitively neutral explanations for the conduct. Overall, we consider that, although Harrington provides an insightful new theory of the anticompetitive potential of list price exchanges, their effects are not sufficiently unambiguous to justify a legal presumption of competitive harm.
Keywords: Information Exchange, List Prices, Collusion, Capacity Constraints
JEL Classification: K21, L13, L41
Suggested Citation: Suggested Citation