Direct versus Communications-Based Prohibitions on Price Fixing

Abstract

This article compares two policies toward coordinated oligopolistic price elevation. Most commentators endorse the view that the law should (and does) prohibit only those price elevations produced by certain sorts of interfirm communications, such as secret price negotiations. In contrast, little attention has been devoted to a more direct approach that encompasses all coordinated price elevations that can be detected and sanctioned effectively. It is demonstrated that the conventional formulation rests on numerous misconceptions, involves complex and costly detection if its logical implications are taken seriously, and tends to target cases with relatively low deterrence benefits and high chilling costs in contrast to those targeted under the direct approach.