CP and CI

January 7, 2017

A recent report by Bloomberg News indicated that the US Justice Department has been “looking for the past two years into allegations of collusion among [generic drug] manufacturers.” The apparent reason is detailed in a study from a firm that “works with law firms to bring litigation against companies”. That study suggested such collusion, citing

“90 medicines whose prices were raised steeply and almost simultaneously by at least two manufacturers, even though there was no obvious reason for the increase, such as greater manufacturing costs.” [1]

But, even the authors of that report concede that the mere existence of such increases does not prove the kind of collusion which would violate US antitrust laws. To have a violation, there must be other “plus factors” involved in the pricing changes, converting what is known to antitrust lawyers as “conscious parallelism” (CP) into a legal violation.[2]

Well, you might say, what else besides agreements to set prices would explain these “almost simultaneous” price changes? How about aggressive and effective competitive intelligence (CI) rapidly alerting one competitor to the pricing changes initiated by another direct competitor in a very constrained market space allowing a rapid exploitation?

But doesn’t that mean that CI contributes to violating the antitrust laws? No. As was said by a US Antitrust Division field office chief in 1989 (!), CI, he said,

“enables companies to take appropriate actions, thus improving their positions. Consequently, a company’s [competitive] intelligence department supplying intelligence to its own management would be viewed as ‘pro-competitive’ and therefore a legitimate activity, not directly affected by antitrust laws.”[3]

Just a thought.

[1] “Widespread drug price increases point to collusion, study finds”, http://www.readingeagle.com/ap/article/widespread-drug-price-increases-point-to-collusion-study-finds.

[2] “Conscious Parallelism: Can it turn a corner?” By Robert A. Jablon, http://www.spiegelmcd.com/files/raj_conscious_parallelism_2011_11_07_12_49_22.pdf.

[3] “Panel on Legal and Ethical Concerns of Conducting Intelligence – Summary of Spring Conference Panel Presentations by Jan Herring, The Futures Group, Panel Moderator”, Competitive Intelligencer, Vol. 4, Issue 2, August 1989, pp. 2, 18. (emphasis in the original)

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