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Illinois walls

Author

Listed:
  • Schinkel, M.P.

    (Microeconomics & Public Economics)

  • Tuinstra, J.

    (Externe publicaties SBE)

  • Rueggeberg, J.

Abstract

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." This discussion paper has resulted in an article in the RAND Journal of Economics , 39(3), 683-99.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Schinkel, M.P. & Tuinstra, J. & Rueggeberg, J., 2003. "Illinois walls," Research Memorandum 012, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    • Handle: RePEc:unm:umamet:2003012
    DOI: 10.26481/umamet.2003012
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    Cited by:

    1. is not listed on IDEAS
    2. Boone, Jan & Müller, Wieland, 2012. "The distribution of harm in price-fixing cases," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 265-276.
    3. Maarten Pieter Schinkel & Jan Tuinstra & Jakob Rüggeberg, 2008. "Illinois Walls: how barring indirect purchaser suits facilitates collusion," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 683-698, September.

    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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