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45 Md. L. Rev. 387 (1986)
Can Conspiracy Theory Solve the Oligopoly Problem

handle is hein.journals/mllr45 and id is 405 raw text is: CAN CONSPIRACY THEORY SOLVE THE OLIGOPOLY PROBLEM? RANDALL DAVID MARKS* Plaintiffs in antitrust litigation traditionally prove price fixing by presenting direct evidence of direct communication among the de- fendants: at trial, a witness who earlier participated in price fixing discussions testifies against his or her co-conspirators. This ap- proach, relying on evidence of clandestine deals hatched in smoke filled hotel rooms, has worked in many markets, but it fails to rem- edy more subtle forms of collusive behavior. Oligopoly markets, in particular, present intractable problems of proof in antitrust litigation.' Absent direct evidence of collusion, courts require at least some circumstantial evidence of enjoinable conduct which, taken together with evidence of consciously parallel business behavior,' proves that an improper agreement to restrain competition exists. As participants in a market characterized by only a small number of competitors, oligopolists have a unique abil- ity to coordinate their business decisions. Theoretically, when a market is structured to allow perfect competition, buyers and sellers have no ability to influence the market price-instead, market forces ensure that price will equal marginal cost. Because of the small number of competitors in an oligopoly, however, each firm has the theoretical power to influence the price/output options available to itself and others. As a result, government enforcement agencies and academics fear that oligopolists can achieve supracompetitive pric- ing without detection. Over the last decade, the Federal Trade Commission (FTC or the Commission) has tackled the oligopoly problem using two novel approaches. First, the Commission attempted a structural remedy * B.S. Econ. 1977, M.B.A. 1979, J.D. 1980, University of Pennsylvania. Attorney, Evaluation Office, Bureau of Competition, Federal Trade Commission. The views ex- pressed herein are not necessarily those of the Commission or any of its members or staff. An earlier version of this paper was presented at the Eastern Economic Association Convention on March 22, 1985. I want to thank my FTC colleagues Malcolm Coate, Kenneth Davidson, John B. Kirkwood, and David Pender, as well as Greg Rogers of the Consumer Product Safety Commission and Joseph Craycraft of the University of Cincin- nati, for their comments on earlier drafts of this paper. 1. See infra text accompanying notes 17-18 (describing oligopoly market model). 2. See infra text accompanying notes 61-63. 387

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