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Competition Law and Development$
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Daniel D. Sokol, Thomas K. Cheng, and Ioannis Lianos

Print publication date: 2013

Print ISBN-13: 9780804785716

Published to Stanford Scholarship Online: January 2014

DOI: 10.11126/stanford/9780804785716.001.0001

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Contracts and Cartels

Contracts and Cartels

Reconciling Competition and Development Policy

(p.155) 9 Contracts and Cartels
Competition Law and Development
Barak D. Richman
Stanford University Press

It has become conventional wisdom that effective competition policy is a necessary ingredient to economic development. But sometimes competition policy is at odds with the pressing priority of securing contract rights. This is because in undeveloped legal systems, cartels are sometimes necessary to enforce contracts. When courts and other public instruments are unable to reliably enforce contracts, private ordering systems often arise to mobilize a group of affiliated merchants to direct coordinated punishments against parties who breach contracts. Yet such coordinated punishments are akin to group boycotts, which normally invite antitrust scrutiny. This chapter focuses on the tension between the well-understood harms of group boycotts as restraints on competition and the unappreciated benefits of group boycotts as pro-competitive solutions to court failures.

Keywords:   Law and development, competition policy, private ordering, coordinated punishments, group boycotts, contract rights

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