Illinois Walls: how barring indirect purchaser suits facilitates collusion
In 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. Copyright (c) 2008, RAND.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 39 (2008)
Issue (Month): 3 ()
|Contact details of provider:|| Postal: 1776 Main Street, P.O. Box 2138, Santa Monica, California 90407-2138|
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0741-6261
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/journal.asp?ref=0741-6261|
References listed on IDEAS
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.:
- McCutcheon, Barbara, 1997. "Do Meetings in Smoke-Filled Rooms Facilitate Collusion?," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 330-50, April.
- Joseph E. Harrington, 2004.
"Post-Cartel Pricing During Litigation,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 52(4), pages 517-533, December.
- Lovell, Michael C., 1982. "Are treble damages double damages?," Journal of Economics and Business, Elsevier, vol. 34(3), pages 263-268.
- Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58, pages 347.
- Hugh C. Briggs III & Kathleen D. Huryn & Mark E. McBride, 1996. "Treble Damages and the Incentive to Sue and Settle," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 770-786, Winter.
- Salant, Stephen W, 1987. "Treble Damage Awards in Private Lawsuits for Price Fixing," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1326-36, December.
- Baker, Jonathan B, 1988. "Private Information and the Deterrent Effect of Antitrust Damage Remedies," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 385-408, Fall.
- Margaret C. Levenstein & Valerie Y. Suslow, 2002. "What Determines Cartel Success?," UMASS Amherst Economics Working Papers 2002-01, University of Massachusetts Amherst, Department of Economics.
- Schinkel Maarten Pieter & Rüggeberg Jakob & Tuinstra Jan, 2003.
027, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- Maarten Pieter Schinkel & Jan Tuinstra & Jakob Rüggeberg, 2005. "Illinois Walls," Tinbergen Institute Discussion Papers 05-049/1, Tinbergen Institute.
- 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.
- Greenhut, M L & Ohta, H, 1979. "Vertical Integration of Successive Oligopolists," American Economic Review, American Economic Association, vol. 69(1), pages 137-41, March.
- James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
- Snyder, Edward A, 1985. "Efficient Assignment of Rights to Sue for Antitrust Damages," Journal of Law and Economics, University of Chicago Press, vol. 28(2), pages 469-82, May.
- Besanko, David & Spulber, Daniel F, 1990. "Are Treble Damages Neutral? Sequential Equilibrium and Private Antitrust Enforcement," American Economic Review, American Economic Association, vol. 80(4), pages 870-87, September.
- Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, March.
- F. M. Scherer, 1997. "How US Antitrust Can Go Astray: The Brand Name Prescription Drug Litigation," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(3), pages 239-256.
When requesting a correction, please mention this item's handle: RePEc:bla:randje:v:39:y:2008:i:3:p:683-698. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.