Tuesday, September 6, 2005
A suit filed in New York on August 11, 2005, by consumers against several banks issuing credit cards alleges that the institutions engaged in collusive activity by requiring customers to engage in mandatory arbitration in lieu of remedies in court. Since many consumer complaints stem from excessive fees and interest rates, the mandatory arbitration clause facilitates the ability of the banks to set fees and engage in other price fixing behavior.
Hanno Kaiser posts an important argument that merger analysis needs to consider the effects of non-price competition as well as price competition. Specifically, merger analysis needs to consider the effect of product repositioning by both the merged and non-merged firms on consumer welfare.
Benjamin Klein of UCLA and Joshua Wright of George Mason have posted an interesting article on SSRN analyzing the economics of slotting allowances. The conclude that "these arrangements are a consequence of the normal competitive process when shelf space primarily promotes incremental manufacturer sales rather than shifts sales between retailers."