AbstractIn its landmark ruling in Illinois Brick Co. v. Illinois in 1977, the U.S. Supreme Court restricted standing to sue for recovery of antitrust damages to direct purchasers. However, antitrust damages are typically (in part) passed on to intermediaries lower in the chain of production and ultimately to consumers. We show that the Illinois Brick rule facilitates collusion. It allows an upstream cartel to shield itself from private damage claims by forwarding a share of cartel profits to its direct purchasers. These benefits dissuade the direct purchasers from exercising their exclusive right to sue for private damages. The cartel can achieve this by rationing inputs at low prices. Several U.S. antitrust cases show symptoms of "Illinois Walls." This discussion paper has resulted in an article in the RAND Journal of Economics , 39(3), 683-99.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-049/1.
Date of creation: 24 May 2005
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Antitrust; treble private damages; Illinois Brick; tacit collusion; vertical restraints; rationing;
Other versions of this item:
- Schinkel, M.P. & Tuinstra, J. & Rueggeberg, J., 2004. "Illinois Walls," CeNDEF Working Papers 04-03, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Schinkel,Maarten Pieter & Rüggeberg,Jakob & Tuinstra,Jan, 2003. "Illinois Walls," Research Memoranda 027, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L4 - Industrial Organization - - Antitrust Issues and Policies
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Illinois Walls: how barring indirect purchaser suits facilitates collusion,"
RAND Journal of Economics,
RAND Corporation, vol. 39(3), pages 683-698.
- RÃ¼ggeberg, J. & Schinkel, M.P. & Tuinstra, J., 2005. "Illinois Walls: How barring indirect purchaser suits facilitates collusion," CeNDEF Working Papers 05-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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- Frank Verboven & Theon Van Dijk, 2007. "Cartel damages claims and the passing-on defense," Center for Economic Studies - Discussion papers ces0715, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
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