Chapter 7: Market Dominance and Collusion
I Introduction It was clearly seen in Chapter 3 that overt collusion received the greatest degree of unanimity of treatment by the three antitrust jurisdictions. Agreements to restrict the terms of trading (covering price, output, rebates, discounts and so on) are per se illegal under Section I of the Sherman Act and Article 81 of the EU Treaty. In the UK the new Competition Act incorporates in its Chapter 1 a similar prohibition. Why is there this unanimity of approach to collusion while for single-firm dominance or merger policies are much more varied? A large part of the answer to this question is that the economic analysis of overt collusion gives much more unequivocal results than it does, say, for horizontal mergers where, as we shall see in the next chapter, complicated trade-offs may be involved. As in much else, Adam Smith anticipated these conclusions more than 200 years ago in what has become the second most quoted passage from the Wealth of Nations: People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible to prevent such meetings, by any law which could be executed, or would be consistent with liberty and justice. But although the law cannot hinder people of the same trade from sometimes assembling together it ought to do nothing to facilitate such assemblies; much less to render them necessary. (Smith, 1776, as given...
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