Tacit Collusion and Oligopoly Issues

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Tacit Collusion and Oligopoly Issues Relevant Cases §1 Sherman Act cases b Interstate Circuit v. US (1939),Theater Enterprises (1954), in re Baby Foods §5 FTC Act cases b Boise Cascade (9 th Cir. 1980); in re Ethyl Corp. (2d Cir. 1984) Overview Issue b firms operating in highly concentrated markets…the firms may “tacitly” collude to price / output o The problem b there is no traditional “contract” for §1 purposes and a “conspiracy” will be difficult to prove b/c there is no evidence of an express “agreement” Therefore, courts have had limited success in combating poor economic performance in oligopoly markets Prof. Turner suggests oligopolies are out of the reach of the Sherman Act b/c the behavior of firms in an oligopoly is rational and virtually inevitable b/c each firm determines its own individual profit maximizing output based on the output of rivals o This argument makes the most sense in a non-cooperative Cournot oligopoly Prof. Posner likens oligopoly behavior to “tacit collusion” and thinks it is reachable by the Sherman Act o Explicit cartel agreements = “express collusion” and oligopolistic behavior = “tacit collusion” A key in tacit collusion cases is to look for facilitating practices that make tacit collusion easier Proving a Price/Output “Agreement” from Circumstantial Evidence
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Tacit Collusion and Oligopoly Issues - www.swapnotes.com...

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