Collusion in Plain Sight: Firms’ Use of Public Announcements to Restrain Competition

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This study investigates public announcements that facilitate coordination among competitors to restrict competition. The focus is on announcements with content about rival firms’ conduct. Nine cases are examined where the media used included annual reports, interviews in trade publications, speeches and panel discussions at semi-public industry meetings, and, most commonly, earnings calls. Three classes of messages are identified. The first class has a firm describe how its own future conduct is contingent on a rival firm’s conduct. Several cases have a high-ranking company official publicly comment that competition is “excessive” and then state that it will raise price with its continuance conditional on other firms raising their prices. These announcements facilitate the formation of an agreement between firms to have a leader-follower arrangement. The second class has a firm prescribe how rival firms or the industry at large should behave in the future. Public announcements described an industry plan to raise prices or reduce supply and recommended that competitors compete less aggressively for the purpose of making the industry more profitable. Lacking a pro-competitive rationale, the case is made that these announcements should be treated as if they were privately conveyed. The third class has a firm describe how rival firms or the industry at large will behave in the future. Such a forecast could be an invitation to firms to act consistent with that forecast. The article concludes with a discussion of some of the enforcement challenges faced by competition authorities and courts.