Assessing umbrella pricing incentives

December 18, 2020

When collusive agreements involve a subset of firms in an industry, they may create the incentive and ability for firms that are not participants in the cartel to raise their prices—so-called umbrella pricing.

In the European Union, Canada, and in some cases in the United States, consumers who purchase a product from firms that engage in umbrella pricing (umbrella purchasers) have standing to sue the cartel members for damages resulting from “overcharges” from umbrella pricing. The defendants in these matters are the cartel members, not the non-cartel members from which the consumers purchased the good. In jurisdictions that allow umbrella purchaser claims, plaintiffs must demonstrate that the losses they incurred stem from collusive actions, which predictably undermined competition. This highlights the importance of identifying and characterizing the link between the pricing of cartel members and non-cartel members.

In this article published in Antitrust (Fall 2020), Mary Beth Savio provides an overview of the requirements for standing for umbrella purchasers in the US, EU, and Canada, and demonstrates how in a marketplace with differentiated products, an analysis of the upward pricing pressure experienced by non-cartel members may contribute to an assessment of whether the requirements for standing are met.

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