A theory of hub-and-spoke collusion

Sahuguet, Nicolas; Walckiers, Alexis

doi:10.1016/j.ijindorg.2016.04.008

Cited by 12 publications

(6 citation statements)

References 30 publications

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“…The hub might be interested in facilitating horizontal agreements as equal prices and harmonised services might result in a higher number of sales. 90 Prices will not always be lower than the ones normally charged by individual retailers. Rather, as the examples of Uber and TaskRabbit show, the hub can also use the aggregated information to raise prices.…”

Section: Hub-and-spokementioning

confidence: 99%

“…Even though the literature has argued that in some cases hub-and-spoke collusion can enhance consumer welfare, the impact of this type of agreements in the sharing economy is still unclear as there is little transparency on what type of information is exchanged and how the pricing algorithms operate. 91 The qualification of the vertical relationship between technology and service providers as a hub-andspoke conspiracy implicates however the awareness of the likely effects of the informational flow. Competition authorities in the European Union will have to prove that the firms using algorithms or platforms as hubs for collusion intended to produce a clearly illegal result (eg, fix prices) or acted with knowledge of the probability of these illegal results or it must be clear that the algorithms were specifically designed to enable collusion.…”

Section: Hub-and-spokementioning

confidence: 99%

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Peers or Professionals?

Ranchordás¹

2018

European Competition and Regulatory Law Review

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For almost a decade, digital peer-to-peer initiatives (eg, Uber, Airbnb) have been disrupting the traditional economy by offering informal, diverse, convenient and affordable services to consumers. However, more recently, the peer-to-peer economy has become increasingly professionalised. Service providers in the ride and home-sharing sectors feel significant pressure to offer services similar to those of professionals, practise the low or high prices suggested by algorithmic pricing tools, and show at all times professionalism. This shift towards professionalisation has been accompanied by regular information exchanges between service providers and platforms as well as by the growing use of algorithmic pricing. This article analyses first the evolution of the sharing economy from a peer-to-peer system that benefited from initial regulatory leniency due to its sustainable and informal goals, to a quasiprofessional economy where users are driven by profit making and the need to receive excellent rating and reviews. Second, it provides a preliminary analysis of the potential competition concerns that might arise as information exchanges and pricing tools become more common in the platform economy. This article contributes to the existing literature by discussing the challenges of enforcing existing competition law tools in an algorithmic context.

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Section: Hub-and-spokementioning

confidence: 99%

Section: Hub-and-spokementioning

confidence: 99%

Peers or Professionals?

Ranchordás¹

2018

European Competition and Regulatory Law Review

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“…of the economic and legal issues regarding hub-and-spoke collusion but do not provide a comparative analy sis of hub-and-spoke cartels to address the questions of this book. 13 There is also a small body of theoretical work on hub-and-spoke collusion, which includes Van Cayseele and Miegelsen (2013), Walckiers (2017), andShamir (2017), as well as some papers motivated by the e-books case (which are referenced in chapter 5).…”

Section: Approach and Overviewmentioning

confidence: 99%

Hub-and-Spoke Cartels

Garrod¹,

Harrington²,

Olczak³

2021

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The first comprehensive economic and legal analysis of hub-and-spoke cartels, with detailed case studies. A cartel forms when competitors conspire to limit competition through coordinated actions. Most cartels are composed exclusively of firms that would otherwise be in competition, but in a hub-and-spoke cartel, those competitors (“spokes”) conspire with the assistance of an upstream supplier or a downstream buyer (“hub”). This book provides the first comprehensive economic and legal analysis of hub-and-spoke cartels, explaining their formation and how they operate to create and sustain a collusive environment. Sixteen detailed case studies, including cases brought against toy manufacturer Hasbro and the Apple ebook case, illustrate the economic framework and legal strategies discussed. The authors identify three types of hub-and-spoke cartels: when an upstream firm facilitates downstream firms to coordinate on higher prices; when a downstream intermediary facilitates upstream suppliers to coordinate on higher prices; and when a downstream firm facilitates upstream suppliers to exclude a downstream rival. They devote a chapter to each type, discussing the formation, coordination, enforcement, efficacy, and prosecution of these cartels, and consider general lessons that can be drawn from the case studies. Finally, they present strategies for prosecuting hub-and-spoke collusion. The book is written to be accessible to both economists and lawyers, and is intended for both scholars and practitioners.

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“…Essentially, there are two types of models that articulate the incentives of hub and spoke cartel members. A first type of model is proposed by Sahuguet and Walckiers (2017) and Shamir (2017). They consider competing retailers that are supplied by a same manufacturer.…”

Section: Introductionmentioning

confidence: 99%

Leniency Policy in Hub and Spoke Cartels

Rutten,

Vennet,

Buts

et al. 2023

Preprint

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The competition literature documents that leniency programs can either destabilize or reinforce the sustainability of horizontal cartels. We contribute to this body of literature by looking at a specific type of cartels, namely hub and spoke cartels: horizontal collusions between spokes facilitated by, at least, one party operating at a different level of the supply chain, the hub. Drawing on earlier work of Van Cayseele and Miegielsen (2013) on hub and spoke cartels, and Chen and Rey’s dynamic leniency model for horizontal cartels (2013), this paper builds a model that measures the impact of leniency programs on hub and spoke cartels. We show that it is always desirable to offer some ex-ante leniency to the first-reporting hub-and-spoke cartel member to discourage cartel formation and assess the optimal leniency rate for both the hub and spokes. We then compare these results with the situation where the hub is excluded from the leniency program and argue that including the hub increases this program’s efficiency in discouraging cartel formation, suggesting that EU leniency programs (which allow the ringleader to benefit from leniency) are more effective than US ones (which do not).

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A theory of hub-and-spoke collusion

Cited by 12 publications

References 30 publications

Peers or Professionals?

Peers or Professionals?

Hub-and-Spoke Cartels

Leniency Policy in Hub and Spoke Cartels

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