Question

Suppose you are an economist working for the Antitrust Division of the Department of Justice.

In each of the following cases you are given the task of determining whether the behavior warrants an antitrust investigation for possible illegal acts or is just an example of undesirable, but not illegal, tacit collusion.Explain your reasoning.

a. Two companies dominate the industry for industrial lasers. Several people sit on the boards of directors of both companies.

b. Three banks dominate the market for banking in a given state. Their profits have been going up recently as they add new fees for customer transactions. Advertising among the banks is fierce, and new branches are springing up in many locations.

c. The two oil companies that produce most of the petroleum for the western half of the United States have decided to forgo building their own pipelines and to share a common pipeline, the only means of transporting petroleum products to that market.

d. The two major companies that dominate the market for herbal supplements have each created a subsidiary that sells the same product as the parent company in large quantities but with a generic name.

e. The two largest credit card companies, Passport and OmniCard, have required all banks and retailers who accept their cards to agree to limit their use of rival credit cards.

Answer 1

A: This warrants an antitrust investigation.

B: This is just an example of undesirable, but not illegal, tacit collusion.

C: This warrants an antitrust investigation.

D: This is not a collusion.

E: This warrants an antitrust investigation.