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Plus Factors in Price Fixing: Insightful or Anachronistic?

In: Economic and Legal Issues in Competition, Intellectual Property, Bankruptcy, and the Cost of Raising Children

Author

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  • Malcolm B. Coate

Abstract

Purpose Plus Factors have long played an important role in inferring a price agreement from the totality of the evidence. In response to changes in the case law, economists have proposed two alternative paths for the future of price fixing analysis. This paper evaluates the suggested approaches and recommends retaining the enhanced Plus Factor methodology. Methodology/approach By carefully defining the Plus Factor concept, three key components of the analysis emerge: (1) information on communications associated with the alleged agreement, (2) economic considerations affecting market competition, and (3) characteristics that serve to differentiate explicit from tacit collusion. Findings Developments rationalizing the Plus Factor concept show promise, as the methodology is not more closely related to economic theory. On the other hand, replacement of the Plus Factor methodology with one focused on market performance seems problematic. By abandoning the Plus Factor concept, the economist loses a key institutional constraint on over-aggressive enforcement. Practical implications Until advocates can address the difficulties associated with using performance evidence to identify price fixing, the standard Plus Factor concept appears more appropriate. Thus, antitrust analysts should continue to use the Plus Factor methodology to infer agreements in price fixing investigations, as long as the economic rationalization of the specific Plus Factor is clearly presented. Originality/value The paper synthesizes a number of recent contributions to the price fixing literature and addresses key issues of interest to the enforcement community. By providing a critique of the proposed policy shift to use performance evidence to infer price fixing liability, the study serves to justify continued application of the Plus Factor methodology.

Suggested Citation

  • Malcolm B. Coate, 2015. "Plus Factors in Price Fixing: Insightful or Anachronistic?," Research in Law and Economics, in: James Langenfeld (ed.), Economic and Legal Issues in Competition, Intellectual Property, Bankruptcy, and the Cost of Raising Children, volume 27, pages 1-41, Emerald Publishing Ltd.
  • Handle: RePEc:eme:rlwezz:s0193-589520150000027001
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