The Nature and Significance of Price Leadership

That the Supreme Court's decision in the Tobacco Case1 of 1946 attaches a new significance to price leadership in oligopolistic markets seems beyond reasonable doubt. The Tobacco decision constitutes a reversal of the stand taken by the Court in the U. S. Steel and International Harvester cases, where the Court ruled that the acceptance of a price leader by the rest of the industry did not constitute a violation of the Sherman Act by the price leader. If we accept the full meaning of what the court has really said, that parallel pricing, whether implemented by an agreement or not, is now illegal, pricing policies prevailing in markets where sellers are few will henceforth be subjected to a much closer examination than they have been in the past.