Does Common Leadership Facilitate Collusion? A Conversation with Ellie Prager

In this episode of Ruled by Reason, AAI Senior Counsel David O. Fisher sits down with economist Ellie Prager to discuss her paper, Collusion Through Common Leadership, co-authored with Alejandro Herrera-Caicedo and Jessica Jeffers and accepted for publication in the Journal of Political Economy. The episode continues a discussion begun in the previous episode of Ruled by Reason about interlocking directorates, or what Professor Prager and her co-authors call "common leadership." Whereas the term "interlocking directorates" traditionally refers to one person sitting on the boards of two companies, common leadership also encompasses arrangements in which an executive of one company simultaneously serves on the board of another. Professor Prager and her co-authors examine whether common leadership is associated with a greater likelihood of collusion. Using evidence from litigation involving no-poach agreements among Silicon Valley companies, they find that the arrival of a common leader increases the probability that two companies will enter into a collusive agreement by 11 percentage points—a ninefold increase over the rate among company pairs without common leaders. Fisher and Prager discuss the distinction between interlocking directorates and common leadership (3:34); the paper's central finding connecting common leadership to collusion (5:03); how evidence from the Silicon Valley no-poach litigation made it possible to study that connection empirically (11:07); why some of the common-leadership arrangements studied were outside the current scope of Section 8 of the Clayton Act (14:22); and how the authors used company-leadership data and econometric methods to distinguish causation from correlation (16:22). They also explore whether product-market overlap, labor-market overlap, or common ownership could explain the results (21:21); the relationship between common leadership and the broader common-ownership literature (26:15); possible efficiencies arising from information sharing and improved corporate governance (31:37); whether common leadership may be part of a preexisting plan to collude (33:42); and the limits of extrapolating from the particular companies and labor markets examined in the study (39:14). Finally, Fisher and Prager consider the implications for antitrust policy and enforcement, including whether the findings support increased enforcement of Section 8, the use of common leadership as an investigative signal of possible collusion, and expanding Section 8 to cover competition in labor and other input markets (41:56).