Title

The Antitrust of Reputation Mechanisms: Institutional Economics and Concerted Refusals to Deal

Document Type

Article

Comments

The most up-to-date version of this piece can be found in the Duke Law Scholarship

Abstract

An agreement among competitors to refuse to deal with another party is traditionally per se illegal under the antitrust laws. But coordinated refusals to deal are often necessary to punish wrongdoers, and thus to deter undesirable behavior, that state sponsored courts cannot reach. When viewed as a mechanism to govern transactions and induce socially desirable cooperative behavior, coordinated refusals to deal can sustain valuable reputation mechanisms. This paper employs institutional economics to understand the role of coordinated refusals to deal in merchant circles and to evaluate the economic desirability of permitting such coordinated actions among competitors. It concludes that if the objective of antitrust law is to promote economic welfare, then per se treatment -- or any heightened presumption of illegality -- of reputation mechanisms with coordinated punishments is misplaced.

Date of Authorship for this Version

May 2008