The cost coordination theory of harm and the EU trucks case

Abstract

This article reviews and critically assesses the “cost coordination” theory of harm developed in a recent eponymous article, Harrington (2022), and its application to the EU trucks case. We conclude that, while the cost coordination theory is a valuable and interesting contribution to the academic literature, it assumes a number of market features that may not be present in the EU trucks case—in particular that list price coordination is persistent rather than occasional, that transaction prices are sufficiently transparent to implement an effective monitoring and retaliation mechanism, and that list price changes are interpreted by local price setters as reflecting changes in cost rather than changes in other variables. We also note that, compared with standard price coordination, cost coordination generally tends to be both harder to sustain and less effective at raising prices if it is sustained.