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Exchanges of Information (A Further Problem in Horizontal Cooperation)

4 important questions on Exchanges of Information (A Further Problem in Horizontal Cooperation)

What type of evidence is consistent with oligopoly behavior

Generally, point to structural market factors that make coordination easier (and "cheating" easier to detect)

Market concentration
Some barriers to entry
Inelastic price
Fungible products (makes "cheating" on the basis of quality harder)
numerous customers and frequent transactions

Defenses to an American Column or Container Corp Claim?

A defendant should try to rebut either theory by identifying some pro-competitive purpose to be served by the information sharing arrangement other than restraining competition. I.e., the prevention of fraud as in Cement Manufacturers (US 1925).

Why was the Cement Manufacturer's justification considered pro-competitive?

Ds successfully argued that their information sharing arrangement was necessary to protect them from a distinct kind of fraud resulting from the particular nature of the contracts used in their trade. This "prevention of fraud" justification was considered pro-competitive because it encourage the market participants to be more active in the market by protecting them from strategic abuses.

Issue Spot: 2 questions to ask when confronted with an information sharing arrangement

First, what kind of information is being shared and how is it being used? Is it disseminated in a way that could facilitate price-fixing? See American Column v. Maple Flooring: The Bookends, Intent-based approach (concerned with forward looking price info)

Second, are the general circumstances, or structure, of this industry such that collusion or interdependent oligopoly pricing behavior would be likely? See Container Corp (analysis focused on whether the industry's structure increased the likelihood that share price information among competitors could facilitate price increases)

The question on the page originate from the summary of the following study material:

CH 9: Exchanges of Information (A Further Problem in Horizontal Cooperation)

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