Re: Deja vu all over again?

[rlande@UBmail.ubalt.edu]

  Could the cigarette makers be explicitly conspiring to raise prices to pay
  for the announced and possible settlements? 
  
  Bob Lande
  
  On Wed, 3 Sep 1997 BOWENJ@acad.ripon.edu wrote:
  
  >      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?
  >