Strategic Use of Public Price Indexes as a Collusive Device

CPI Antitrust Chronicle, July 2023

10 Pages Posted: 30 Oct 2023

See all articles by Margaret C. Levenstein

Margaret C. Levenstein

University of Michigan at Ann Arbor - Survey Research Center; The Stephen M. Ross School of Business at the University of Michigan, Business Economics and Public Policy

Valerie Y. Suslow

Johns Hopkins University - Carey Business School

Date Written: July 27, 2023

Abstract

While public price indexes are widely used for the purpose of increasing market efficiency through information transmission, they can also be used strategically with an anti-competitive purpose. The mechanisms vary, such as submitting false price reports, targeting a segment of the market that influences the index, or designing the price index to ease manipulation. A price index can be particularly vulnerable to potential anti-competitive actions when long-term contracts are pegged to the index, that is, when the index is “hardened” into the contract. Although the Socony-Vacuum case has long been recognized as an example of this phenomenon, there are other cases as well where this behavior has occurred. We describe several antitrust cases where a price index was used to facilitate collusion. In light of these cases, we draw some general lessons. Our findings about the use of price indexes to reduce competition is not a condemnation of price indexes, but rather calls attention to the importance of the rules and institutions that are used to produce and govern them.

Keywords: Antitrust, price-fixing, cartels, collusion, price index, information sharing

JEL Classification: K21, L41

Suggested Citation

Levenstein, Margaret C. and Suslow, Valerie Y., Strategic Use of Public Price Indexes as a Collusive Device (July 27, 2023). CPI Antitrust Chronicle, July 2023, Available at SSRN: https://ssrn.com/abstract=4597242

Margaret C. Levenstein

University of Michigan at Ann Arbor - Survey Research Center ( email )

500 S. State Street
Ann Arbor, MI 48109
United States
734-615-9088 (Phone)
734-647-1186 (Fax)

HOME PAGE: http://www-personal.umich.edu/~maggiel

The Stephen M. Ross School of Business at the University of Michigan, Business Economics and Public Policy

Ann Arbor, MI 48109
United States
734-764-8336 (Phone)

Valerie Y. Suslow (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

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