On September 29, 2023, the ABA Antitrust Section Economics Committee hosted the webinar “Invigorating Coordinated Effects Analysis” featuring Professor Nathan Miller of Georgetown University and moderated by Dr. Isabel Tecu of Charles River Associates. The speakers discussed coordinated effects generally, how merger activity may impact coordinated effects, and compared coordinated and unilateral effects.
Prof. Miller began by providing a general overview of coordinated effects and collusion. Behavior that is nonsensical at the individual level, for example output suppression or increasing prices may prove profitable when undertaken in coordination with others. However, this creates a tense dynamic in which individual parties have an incentive to undermine collusion for their own gain. An example of such behavior is an OPEC member increasing output beyond agreed-upon targets by the cartel.
A merger may affect the stability and magnitude of coordination in an industry, which is highlighted in the existing and draft Merger Guidelines. The guidelines include a checklist of six characteristics indicating a market may be vulnerable to collusion: previous collusion attempts, easily observable competitive initiatives by rivals, small and frequent sales, a high cost for deviating from coordination, low demand elasticity, and few mavericks (firms unlikely to agree to coordination). Prof. Miller also discussed the ease of entry into a market as a factor affecting the longevity of collusion. As an example, he cited the delayed entry into the generic prescription drug market resulting from FDA regulations, resulting in a delay of entrants to disrupt collusion in that market.