Buyer Cartels: Defining Appropriate Competition Policy

Buyer power issues are of increasing concern for competition law and policy. This includes buyer cartels. It is important to distinguish cartels from legitimate buying groups although the later can also cause competitive harms. Buyer cartels are not the mirror image of seller cartels because buyer power arises from smaller market shares, buyers have less incentive to defect from a buyer cartel, such cartels can include more participants, and they can employ tacit collusion more readily. Under most law such cartels are illegal, but the arguments for that conclusion are weaker than they should be because of a failure to consider the impact on the competitive process. Buyer cartels should have more attention and appropriate legal policies.

By Peter C. Carstensen¹

Both buyer cartels and buying groups have received increasing notice in the last fifteen years with growing awareness of buyer power’s potential for harmful competitive effects.² The most recent area of interest is labor markets where buyer power appears to be much more pervasive than conventional labor market theory had postulated.³

Buyer cartels pose serious risks to the market process and have no persuasive justification. Hence, unless regulated, they should be unlawful under all circumstances, despite the potential negative effects of seller power on buyers. But because buying groups can have utility, it is essential to distinguish between two types of horizontal agreements. At the same time, buying