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Monopsony Abuse Or Efficient Purchasing? Quality Measurement In The Tobacco Leaf Market

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  • F. Andrew Hanssen

Abstract

In the recent case of Deloach v. Philip Morris, plaintiff tobacco growers accused the major cigarette manufacturers of using unusually structured tobacco auctions to engage in monopsony collusion. The DeLoach case produced one of the largest antitrust settlements ever. The objective of this paper is to evaluate the claims of exercise of monopsony power by exploring why tobacco wholesaling systems (which have evolved dramatically over time) have taken the various forms they have. The paper concludes that the ways in which tobacco leaf has been sold—including the allegedly collusive auctions—developed to combat the fundamental problem that the quality of tobacco leaf is very costly to measure.

Suggested Citation

  • F. Andrew Hanssen, 2010. "Monopsony Abuse Or Efficient Purchasing? Quality Measurement In The Tobacco Leaf Market," Journal of Competition Law and Economics, Oxford University Press, vol. 6(2), pages 443-456.
    • Handle: RePEc:oup:jcomle:v:6:y:2010:i:2:p:443-456.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhp022
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    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • K2 - Law and Economics - - Regulation and Business Law
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L8 - Industrial Organization - - Industry Studies: Services

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