Oligopoly

Oligopoly
1999

The OECD Competition Committee debated oligopolies in 1999. This document includes an executive summary, an analytical note by Mr. Gary Hewitt for the OECD and submissions from Australia, Canada, the European Commission, Finland, Germany, Italy, Japan, Korea, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom and the United States, as well as an aide-memoire of the discussion.

Oligopolies are markets where profit maximising competitors set their strategies by paying close attention to how their rivals are likely to react. In these conditions, firms might differentiate their products, which can benefit some consumers, but at a price. Oligopoly inter-dependence can also foster anti-competitive coordination. Competition laws prohibit collusion that raises prices, restricts output or divides markets. But the laws do not prohibit conscious parallelism. Thus firms in an oligopoly might imitate their rivals’ pricing and other competitive behaviour in a process that harms consumer welfare, yet without reaching an explicit agreement. Competition agencies generally prefer to deal with this risk through structural prevention, notably merger control, rather than detailed regulation. Some competition agencies also employ behavioural restraints to reduce the probability of conscious parallelism.

Fighting Hard Core Cartels: Harm, Effective Sanctions and Leniency Programmes (2002) Nature and Impact of Hard Core Cartels and Sanctions against Cartels under National Competition Laws (2002) OECD Recommendation of the Council Concerning Effective Action Against Hard Core Cartels (1998) Competition Policy and Procurement Markets (1998) Regulatory Reform, Privatisation and Competition Policy (1992)

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Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development

DAFFE/CLP(99)25

OLIS : 19-Oct-1999 Dist. : 21-Oct-1999... [continues]

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