The Big Powerful Innocent Oligopoly

1
The Big Powerful Innocent Oligopoly

• The situation
• Market has few players, all successful. A Shared
  Monopoly
• High barriers to entry.
• Product is homogeneous.
• Numerous buyers with no acceptable substitutes.
• Sellers have been able to generate
  supracompetitive prices for a long time without
  any agreement. Just natural market course of
  dealing.
• Sellers have power and means to continually offer
  different products,
• develop multiple brands, that have effect of
  keeping others out.
• 7. No bad conduct Just power and effective
  operations.

2
The Big Powerful Innocent Oligopoly
FTCs Deconcentration Case Against Cereal
Industry. Who were the players? What were their
market shares? What had companies done to
maintain their shared monopoly? Was there any
evidence of collusion or predatory
behavior? What was FTCs rationale for deciding
to not pursue the matter? What practices did the
FTC say may be singled out for action? Can FTC
force parties to compete? Where Perschuk and
Bailey correct in saying legislature should act?
3
Bogosian v. Gulf Oil Corp. (3rd Cir. 1978)

• Basic Facts Suit by independent service station
  dealers alleging that 14 big oil
• companies violated Sherman 1 by tying leases of
  land with requirement
• to use only lessors trademark, sell only
  lessors gas. Dist.Ct. dismissed
• because no allegation of contract or
  conspiracy, just interdependent
• conscious parallel action.
• Held 3rd cir reversed.
• Conscious parallel action, without more, not
  sufficient. Must show
• acts in contradiction of Ds interest or
  motivation for agreement.
• P says it can prove with discovery.
• P argues interdependent parallel action alone
  should be sufficient
• in highly concentrated market. This theory
  cant be tested without
• a fuller record.
• Dissent Allegation of conscious parallel
  behavior, without more, not
• state claim under Sherman 1.

4
United States v. General Electric Co. (1977)

• Basic Facts GE and Westinghouse were only two
  big turbine generator
• Producers. Allegation was that they fixed prices
  with signals. Consent
• decree with government approved by court.
• What were signals?
• What was harm in giving customers price
  protection on sales?
• How did decree remedy problems?
• Was there any allegation of agreement or
  conspiracy?

5
E.I. Du Pont De Nemours Co. v. FTC (2nd Cir.
1984)
Basic Facts FTC issued order against four major
antiknock compound manufactures. Fact showed no
agreement and no collusive, predatory,
or artificial conduct intended to injure
competition. What were the challenged business
practices? What was central issue of FTCs
authority? Does Section 5 under FTC Act give FTC
broader authority then Sherman or
Clayton? What did court say about tight
oligopoly market that engages in conscious
parallel pricing to maintain supracompetitive
prices? Was court correct in finding against
FTCs alleged attempt to regulate bona fide
business practices in a tight oligopoly market?