[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]
Deja vu all over again?
In 1946, the Supreme Court, in a ruling hailed by some as
proclaiming a "new" Sherman Act, used the doctrine of "conscious
parallelism" to find that the then Big Three cigarette companies
had violated antitrust law. Though there was no direct evidence
of conspiracy to fix prices, the Court found the use of price
leadership to drive low-cost brands from the market persuasive.
The leader, Reynolds, had lowered its price; American and Liggett
& Myers had followed. Smaller firms lost most of their market,
and Reynolds, again immediately followed by the other two, then
put the price back up.
Today's newspaper reports the second cigarette price
increase of the year, announced by Phillip Morris and matched by
Reynolds and Brown & Williamson. This increase follows, and
accelerates, the industry price hikes that have occurred since
the major firms slashed prices in 1993, a measure taken to limit
the market inroads then being made by cheaper discount brands.
The similarities here seem evident enough. But we would, I
think, be quite surprised were the Antitrust Division to question
the price behavior of the 1990's.
What accounts for the change?