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Can ‘Fair’ Prices Be Unfair? A Review of Price Relationship Agreements

The report, prepared for the OFT by LEAR, examines the various forms these agreements can take, their potential benefits and anti-competitive effects, drawing on economic literature and relevant case law. The OFT will present the findings today at a joint workshop held by the US Federal Trade Commission and Department of Justice on the implications for antitrust policy and enforcement of ‘most-favoured nation’ (MFN) clauses, which are a type of price relationship agreement.

The report suggests that while some types of price relationship agreements could be attractive to buyers, they could also have a softening effect on competition. For example, shoppers offered a ‘lowest price’ guarantee may not bother to shop around as much as they would otherwise, thus reducing the downward pressure on prices. Furthermore, if a rival of a ‘lowest price’ retailer knows that any price reduction will quickly be matched or beaten, the incentive to lower prices may be reduced.


Date: September 2012
Author(s): Luca Aguzzoni (Lear), Paolo Buccirossi (Lear), Lorenzo Ciari (Lear), Kenneth Corts (Rotman School of Management), Massimo Tognoni (Lear), Giancarlo Spagnolo (SITE, EIEF, University of Rome Tor Vergata, CEPR and Lear), Cristiana Vitale (Lear), Gian Luca Zampa (Freshfields Bruckhaus Deringer), Alessandro di Giò (Freshfields Bruckhaus Deringer)
Tag(s): Research Papers , Competition Economics, Cooperation and Vertical Agreements