Oligopoly

Oligopolies are markets where profit maximising competitors set their strategies by paying close attention to how their rivals are likely to react. In these conditions, firms might differentiate their products, which can benefit some consumers, but at a price. Oligopoly inter-dependence can also foster anti-competitive co-ordination. Competition laws prohibit collusion that raises prices, restricts output or divides markets. But the laws do not prohibit conscious parallelism. Thus firms in an oligopoly might imitate their rivals’ pricing and other competitive behaviour in a process that harms consumer welfare, yet without reaching an explicit agreement. Competition agencies generally prefer to deal with this risk through structural prevention, notably merger control, rather than detailed regulation. Some competition agencies also employ behavioural restraints to reduce the probability of conscious parallelism. This document comprises proceedings in the original languages of a Roundtable on Oligopoly which was held by the Committee on Competition Law and Policy in May 1999. It is published under the responsibility of the Secretary General of the OECD to bring information on this topic to the attention of a wider audience. This compilation is one of several published in a series entitled “Competition Policy Roundtables”