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Public Policy in Private Markets

Public Policy in Private Markets. Collusion wrap-up Brief Review. Announcements. 3/6: Debate 1 HW 3 due on that day (posted) Debaters: video by tomorrow. 4/3: Debate 2 (posted) – video due to me by March 30. Announcements. 3/8: Midterm 1

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Public Policy in Private Markets

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  1. Public Policy in Private Markets Collusion wrap-up Brief Review

  2. Announcements • 3/6: Debate 1 • HW 3 due on that day (posted) • Debaters: video by tomorrow. • 4/3: Debate 2 (posted) – video due to me by March 30.

  3. Announcements • 3/8: Midterm 1 • In-class exam (11:15-12:30), will start a couple of minutes earlier to give all ample time. • Review sheet posted, including sample questions (40% multiple choice, 60% essay) • Available to answer questions via email all the time. • On day of exam: 9-11 am @ my office to answer questions

  4. Who can sue in price fixing cases? • Recall: treble damages are incentive for private suits • Private cases can be brought by: • Individual firms (ADM: farmers) • Class action suits: groups (firms or individuals) that were damaged by the conspiracy (customers in ATPCO case) • State attorney generals as a representative of groups within the state (Milk)

  5. Who can sue in price fixing cases? Input Suppliers (e.g. hops) Manufacturers (e.g. Anheuser-Busch) Wholesalers (Distributors) Retailers (Supermarkets) Consumers

  6. Who can sue in price fixing cases? • Suppose: price fixing between wholesalers • Who may be damaged? Contentious issue: • Overcharges: • Retailers who bought product at a highprice. What if they just passed on the price increases? • Consumers? Ultimately paid the higher price • Loss of Business: • Input suppliers and manufacturers: depressed demand, lower sales, lower profit

  7. Who can sue in price fixing cases? • Who can actually sue? • Under Illinois Brick Decision (1977): • Only parties that have a direct commercial relationship with conspirator • Only direct buyers or sellers • Buyer cases are more important and successful • Bottom line: if you are more than 1 step away, you can’t sue (except in few states where state law supersedes Illinois Brick --California, DC)

  8. Who can sue in price fixing cases? • What about our beer example? • Only manufacturers and retailers could sue • What if it was the manufacturers who were price fixing? • Input suppliers • Wholesalers • ADM: end consumers sued only in certain states

  9. Who can sue in price fixing cases? • Some experts disagree with Illinois Brick: • If overturned, more incentives to sue and recover damages • Several efforts since 1977 to overturn this ruling, but unsuccessful • Businesses agree with Illinois Brick: • It avoids double jeopardy. For example a wholesaler paying damages twice, once to the retailer and then to the consumer

  10. Review • Will go through review sheet in class

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