Exchanging Price Information can be Efficient: Per se Offences should be Legislated very Sparingly

16 January 2003
By James Mellsop and Dr. Lewis Evans

In this New Zealand Institute for the Study of Competition and Regulation Working Paper, NERA Director James Mellsop and Special Consultant Dr. Lewis Evans draw upon relevant theory of auctions to show that information exchange among firms that leads to an agreed schedule of prices may not be price fixing, and may enhance welfare. A case is described in which per se illegal communication among industry players that produced such agreements enhanced welfare. In the circumstances of the case communication substituted for information exchange that would have been provided by a forward market that was too costly to establish. The results are in accord with a growing body of literature that suggests that per se illegality under competition law should be used very sparingly.