ECONOMICS UPSIDE-DOWN: LOW-PRICE GUARANTEES AS MECHANISMS FOR FACILITATING TACIT COLLUSION.

INTRODUCTION In a recent newspaper advertisement, Circuit City, a regional consumer electronics retail chain prominent in the northeastern United States, offered potential customers the following low-price guarantee ("LPG"): For every product we sell, we'll beat any legitimate price from a local store stocking the same new item in a factory-sealed box. Even after your purchase, if you find a lower price within 30 days, including our own sale prices, we'll refund 110% of the difference. 1 Many of Circuit City's competitors and other consumer electronics retailers throughout the Northeast have offered similar guarantees. 2 Although at first glance these LPGs might appear to be a simple marketing ploy or even a boon to consumers, in reality they might be used as mechanisms for facilitating tacit collusion. 3 In fact, LPGs provide a particularly potent instrument for implementing tacit collusion and offer little offsetting economic benefit. In light of this analysis, this Comment explains why courts, scholars, and antitrust enforcement officials should scrutinize the use of LPGs to ensure that they are not utilized for collusive purposes. The Comment then evaluates the possibility of prosecuting attempts to facilitate tacit collusion via LPGs under current antitrust laws. Finally, the Comment concludes by calling on legislators, regulators, and courts to modify and clarify existing antitrust laws to correct defects in applying existing statutory prohibitions on collusion to cases involving LPGs. I. LOW-PRICE GUARANTEES AND THE CONSUMER RETAILING MARKET A. Definition of a Low-Price Guarantee For the purposes of this ...