Cartels and Economic Collusion
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Cartels and Economic Collusion

The Persistence of Corporate Conspiracies

Michael A. Utton

Adam Smith warned of the prevalence of corporate conspiracies more than two hundred years ago. Since then, interest in cartels has sometimes intensified (during the Great Depression, for example) and sometimes diminished, but the need for control has always remained on the antitrust agenda. This well-documented book reviews the economic case against corporate collusion, as well as the arguments made for a more permissive attitude.
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Chapter 1: The Economics of Collusion

Michael A. Utton


I. INTRODUCTION The term conspiracy occurs both in one of the most famous quotations from Adam Smith’s Wealth of Nations and in Section 1 of the Sherman Act. According to the Shorter Oxford Dictionary a conspiracy is ‘a combination of persons for an evil or unlawful purpose; an agreement between two or more to do something criminal, illegal or reprehensible; a plot’. The first part of this definition certainly matches what Smith had in mind when he argued that ‘people of the same trade seldom meet together, even for merriment or diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices (Smith [1776] 1977: 117). A little over a century later the Sherman Act, the foundation of US antitrust policy, made such combinations illegal. Thus Section 1 reads, in part, ‘every contract, combination in the form of a trust or otherwise, or conspiracy in restraint of trade or commerce among the several states, or with foreign nations, is declared to be illegal’. Participation in such conspiracies is now a criminal act both in the US and the UK, although not in the European Union (EU). The persistence with which a minority of businessmen engage in such activities and thus run the risk of personal fines and possible imprisonment suggests that the rewards are correspondingly very high, as long as the perpetrators remain undetected. Their tenacity is all the more surprising in view of the well-known difficulties of holding a restrictive agreement together....

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