ABSTRACT
This chapter addresses a particular form of inefficient contract: namely, one into which companies enter to suppress competition. It focuses on concerted behaviour. Four antitrust rules apply without regard to market power. Specifically, horizontal rivals may never agree nakedly: to limit price competition; to limit output; to divvy up their sales territories; or not to deal with third-party competitors. The principal goal of competition policy is to eliminate cartels. 'Tacit collusion' or 'conscious parallelism' occurs when rivals collectively embrace monopoly pricing and output through independent action. Economists use the term 'monopsony' to characterise this market condition. The unilateral acquisition or exercise of monopsony power is lawful in the absence of predatory or exclusionary practices. Restrictions on horizontal competition endanger efficiency because they tend to restrict output and to raise price. Horizontal market-sharing agreements are the most destructive of efficiency because they eliminate both price and quality competition. Resale price maintenance can also take the form of a minimum retail price.
