Wednesday, February 20, 2019

Suppliers As Forgotten Cartel Victims

Jens-Uwe Franck, University of Mannheim - Department of Law and Martin Peitz, University of Mannheim - Department of Economics discuss Suppliers As Forgotten Cartel Victims. Worth downloanding!

ABSTRACT: Antitrust law has always allowed buyers of the products of a pricefixing cartel to obtain compensation even when the buyers are not consumers, but rather downstream firms in the supply chain, and even when these firms are able to pass the increase in price brought about by the cartel on to the ultimate consumer of the finished good. Antitrust has so far failed to appreciate, however, that suppliers to a cartel or to the cartel’s customers are in the same economic position as buyers from a cartel insofar as they suffer the harm of reduced output, because those higher cartel prices reduce demand, and that in turn reduces the amount of inputs the cartel demands from suppliers. Moreover, component suppliers will have to lower their prices in reaction to the reduced demand and so will sustain damage due to a cartel-induced underpayment that is economically related to the overcharge that harms the cartel’s customers. It is argued that the courts should reverse the current doctrine, which essentially limits antitrust standing to direct purchasers. While this would constitute a major change under federal law, it would be consistent with current law in those states that grant antitrust standing to indirect purchasers.

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