Facilitating practices and the path-dependence of collusion

This paper exploits major shifts in American antitrust policy during the 1930s to investigate the impact of facilitating practices on industrial profitability. While the National Industrial Recovery Act effectively legalized collusion in many industries, this paper suggests only industries that adopted certain trade practices were able to overcome cartel enforcement problems. Consistent with previous theories of the path-dependence of collusion, the effects on price-cost margins are found to have persisted after the act's repeal. The government's pattern of granting facilitating practices is also investigated and is found to contravene the political rhetoric of the day. Antitrust policy implications are discussed. (C) 1999 Elsevier Science B.V. All rights reserved.