Cartel Law Research Articles

Unprofitable Cartels: Evidence from a Natural Experiment in the UK

I analyse the effect of collusion on profitability with the use of evidence from a natural experiment of policy reform: the introduction of anti-cartel legislation in the UK in the late 1950s. This caused an intensification of price competition in previously collusive industries but did not affect industries that had not been collusive. Three main results are established: First, a comparison of the two groups of industries shows that the breakdown of collusion had no significant overall effect on profitability in the long run—although it had a strong negative effect on firm numbers. Second, the larger was the decrease in firm numbers, the smaller was the decline of profitability in previously collusive industries; however, no such correlation exists in industries that were not affected by the cartel law. Third, most cartels did not restrict entry; but in industries where entry had been restricted, profitability rather than firm numbers decreased when collusion broke down. These results are consistent with theories that emphasise the role of entry conditions for profitability: Cartels are often unprofitable because of entry even when collusion is effective.

Cartel Practices in Indonesian Tyre Industry: Assessing the Role of the Indonesian Tyre Business Association

This study examines the legal standing of the Indonesian Tyre Business Association (APBI) in light of the KPPU Decision Number 08/Pdt.G/KPPU-I-2014 concerning tire cartel violations in the Indonesian automotive industry. Utilizing normative legal research methods focusing on positive legal norms, the study identifies and systematizes violations of business competition rules by six major APBI member companies between 2008 and 2012, and critically analyzes and interprets the evidentiary basis of these findings. The companies allegedly colluded on tire pricing, manipulating the market for Passenger Car Radial (PCR) tires and inducing unfair business competition. The study asserts that, while the APBI's role in facilitating this collusion was apparent, its legal liability remains unclear due to the association's ability to influence member practices without a binding enforcement mechanism. These findings raise critical implications for market competition and cartel law enforcement, necessitating a re-evaluation of the legal provisions surrounding business associations, especially in the context of Indonesia's anti-monopoly and unfair competition laws.Highlights:
 
 APBI's facilitation of cartel behavior among its members.
 Unclear legal liability of business associations in anti-competitive practices.
 Need for re-evaluation of legal provisions surrounding business associations.
 
 Keywords: Cartel, Indonesian Tyre Business Association (APBI), Unfair Business Competition, Competition Law, Indonesian Tyre Industry

Fragrance makers under investigation

The European Commission (EC) has begun investigating fragrance ingredient manufacturers for possible anticompetitive practices that could hurt buyers of their products. The EC, along with authorities in Switzerland and the UK, carried out raids on March 7 to collect evidence at the premises of some of Europe’s biggest fragrance ingredient firms. The US Department of Justice’s Antitrust Division is also involved in the probe. In addition to the raids, the EC says it has sent formal requests for information to several companies in the sector. International Flavors & Fragrances, Firmenich, Givaudan, and Symrise have confirmed to C&EN that they are part of the investigation, and all say they are cooperating fully with authorities. The Swiss competition commission says it “has indications that several undertakings active in the production of fragrances have violated cartel law.” It adds that “there are suspicions that these undertakings have coordinated their pricing policy, prohibited their

Investigations in European antitrust law

The Commission is responsible for investigating cartel law violations and imposing fines on companies. The investigations are carried out in an administrative procedure in which the facts of the case must be investigated in compliance with the rule of law. Here, fundamental rights must be guaranteed. In this respect, the jurisdiction of the ECJ still shows deficits, as it is based on the assumption that human rights belong exclusively to human beings. When legal persons are fined, they must be granted the guarantees of constitutional law.

Australian Cartel Law: Recent Developments

Australian Cartel Law: Recent Developments

The Practice of Supervisory Rights in Hungarian Cartel Law with Special Attention to the Duties of the Minister and the Legal Director

Hungary introduced provisions on cartels with the enactment of Act XX of 1931. To protect good morals and public interests, the Act regulated the tools of state intervention and supervision. This legal field was the summarization of the proceedings of cartel supervisory authorities, in which not only executive state bodies but also judiciary organs took part. The paper focuses on the development of the Hungarian cartel law, with special attention to the practice of the courts and the aims of the State related to the supervisory power over the cartels before the codification of the Hungarian cartel law. The main aim of the study is to put an emphasis on the tasks of the responsible Minister and the legal director, mainly by analyzing the related primary sources. The purpose of this study is also to explain the tasks of the responsible Minister after the Cartel Act came into force, and the demonstration of the practice related to the proceedings. The main question is what the functions of the supervisory authorities related to the cartels were. In connection with the legal director, I would like to illustrate his task as a representative of state interests in the mainly cartel-related lawsuits.

Introduction to the Hungarian Cartel Regulation in the Interwar Period

WWI significantly influenced the development of private and trade law. The regulation of economic law institutions came up as a necessity. To protect the consumers’interests, the state interfered with private law affairs and regulated sharking procedures, unfair competition and cartel law. By taking European regulation results into account, cartel regulation organisations were introduced by the Cartel Act; the most important of them was the Cartel Court. This paper shows the most important steps of the antitrust regulation in Hungary’s special attention to the relevant European cartel regulations.

Straf- und bußgeldrechtliche verantwortung von unternehmen, insbesondere im kartell-, datenschutz-und bankenaufsichtsrecht, de lege lata und de lege ferenda

In the law of the European Union, liability for (administrative) fines (Geldbußen) has developed as a special sanction model for regulatory offences, first in the area of cartel law, now of data protection and banking supervisiory law, too. The criminal law systems for judicial persons in the EU member states are oriented towards the EU system of enterprise liability. This leads to problems, especially with regard to the sentencing and to procedural guarantees. The emerging path of convergence despite different sanction models – responsibility of enterprises versus responsability of judicial persons - should be continued in view of the punitive nature of the (administrative) fine.

Corona Crisis Cartels: Sense and Sensibility

Western competition authorities responded quick and united to the COVID-19 pandemic with a generous exemption from cartel law for any companies that aim to solv

Ein Erziehungskartell zur «Heilung der Geister»? Ludwig Erhards Bundeswirtschaftsministerium und die gescheiterte Wettbewerbsordnung der Konsumseifenindustrie von 1954/55

Abstract This article deals with a case study from competition policy and decartelization in West Germany in the early to mid 1950 s. Whereas much research has focused on the discussions about the German cartel law of 1958 and its long process of formation, this article takes a closer look at the possibilities that Ludwig Erhard and his Ministry of Economics already had under the Allied Laws of 1947 that remained in place until 1957. This is demonstrated by a case study about the soap cartel of 1954/55. While Erhard and most of his civil servants were aware that this cartel would not be able to solve the soap industry’s problems, they still decided to push the Allied authorities towards approving it to demonstrate the inadequacy of cartelization. Thereby, they dealt a blow to those leaders of industry associations arguing against a strict ban on cartels. One of Erhard’s most influential opponents, Fritz Berg, had praised the soap cartel, which allowed more internal competition than simple price fixing cartels, as a model for future cartels and an example proving the disadvantages of a flat-out cartel ban. By letting the cartel fail under the conditions of a rapidly modernizing market instead of banning it, Erhard dealt a major blow to Berg’s argument. This way, Berg and his allies could not blame the failure of the soap industry on decartelization.

Regulation and Practice of Hungarian Cartel Law in the 20th Century

Regulation and Practice of Hungarian Cartel Law in the 20th Century

The Lawsuit of Public Interest in Cartel Law: Case Law of the Cartel Court in Hungary

Krakowskie Studia z Historii Państwa i Prawa » Tom 12 (2019) » Zeszyt 3 » The Lawsuit of Public Interest in Cartel Law: Case Law of the Cartel Court in Hungary A A A

A Scientific Examination of and Report on the Hungarian Cartel Law in the Framework of the Bolyai Scholarship

Krakowskie Studia z Historii Państwa i Prawa » Tom 12 (2019) » Zeszyt 3 » A Scientific Examination of and Report on the Hungarian Cartel Law in the Framework of the Bolyai Scholarship A A A

Measuring the Deterrent Effect of European Cartel Law Enforcement

Abstract This article proposes a new approach to measuring the deterrent effect of cartel law enforcement by combining a game-theoretic model with Monte Carlo simulations. The game-theoretical analysis shows which type of perfect Bayesian Nash equilibria is obtained depending on the parameter setup: perfect compliance, imperfect compliance or zero compliance. For each equilibrium, we also derive the probabilities of type I (false-positive) and type II (false-negative) errors committed by the cartel authority. To account for the uncertainty and the vague knowledge concerning the model parameters, we perform Monte Carlo simulations based on parameter ranges extracted from the related literature. The simulations indicate that zero compliance dominates the picture and that the error probabilities are high for type II and negligible for type I errors. The results are fairly robust against correlation in the input parameters. Further robustness studies and interactive visualizations can be obtained with a supplemental web application.

Corporate Financial Penalties for Cartel Conduct in Australia: A Critique

For much of the early part of the last decade, the focus of Australian cartel law and enforcement was on the introduction and implementation of a criminal regime for cartel conduct, a reform supported by Professor Baxt consistent with his long-standing advocacy of effective enforcement of competition law during his tenure as a leading academic and practitioner in the field and as Chairman of the (then) Trade Practices Commission.

Collusion, profitability and welfare: Theory and evidence

In a differentiated oligopoly model with free entry, the static welfare loss from collusion is larger the lower the entry cost, the larger the market size and the higher the degree of product differentiation. The cartel overcharge is larger the lower the entry cost and the larger the market size, and is independent of the degree of product differentiation. These theoretical results are consistent with evidence from a natural experiment of policy reform, the introduction of cartel law in the UK in the late 1950s. Price-cost margins declined after the breakdown of cartels in low-capital and larger-sized industries relative to capital-intensive and smaller-sized ones. There is weaker evidence of a fall in price-cost margins in consumer good and advertising-intensive relative to producer good and low-advertising industries. Crucially, these effects are not observed for industries that were not affected by the cartel law. A comparison of these findings with evidence on the incidence of collusion suggests that the welfare loss from collusive pricing may often be smaller in industries where cartels tend to form than in those where collusion is more difficult to sustain.

Compliance with cartel laws and the determinants of deterrence – an empirical investigation

ABSTRACTThis paper empirically investigates the drivers of compliance to cartel law and deterrence properties of enforcement tools with conjoint firm-level online survey data from the Netherlands. Compliance is measured by a response to varying hypothetical cartel scenarios. Respondents were asked to indicate the likelihood on a scale from 1 (lowest) to 10 (highest) that they would end a cartel that they discovered within their organization. The personal fine for the manager and the fine for the company have a statistically significant deterrent effect. Firm size, publicity following an infringement and the leniency program have no significant effect on compliance. For the most deterring scenario, the probability of a fully compliant outcome (defined as likelihood equal to 10) is estimated at .68. Self-reported knowledge of cartel law, having a compliance officer and the habit to consult a lawyer on competition law matters are statistically significant drivers of compliance.

Genossenschaften, Apps und Kartellrecht

Abstract Todays apps are offering services that compete against the traditional business structures of cooperative banks. Taxi cooperatives have reacted on this by forbidding their members the use of those apps. This prohibition is, due to a current judgement by the Higher Regional Court in Nuremberg according to the cartel law, inadmissible and cannot be based on a privilege of the cooperative immanence. On the occasion of this decision the article shows that cooperatives aren’t able to evade themselves from the digital competition but that they should take this as a chance.

Balancing the Public Interest-Defense in Cartel Offenses

Horizontal agreements may be exempted from cartel law if they advance certain public interests, such as public health or the environment, enough to compensate the consumers damaged by their anti-competitive effects. We formalize the balancing of cartel unit price overcharges on a private good against the willingness of its consumers to pay for an accompanying public good. A cartel could improve upon the classic under-provision in competitive equilibrium, even though it crowds out private contributions. We show however that the required compensating public good level in no-contributor economies decreases in each consumer's willingness to pay, which is contrary to the Samuelson condition. With at least one private contributor, the policy can never attain first-best. Moreover, by self-selection the policy asks those individuals with the lowest willingness to pay for the public good to pay most, which is orthogonal to Lindahl-pricing. As a result, the public interest-cartel is typically not sustainable. To identify a genuine public interest-defense requires more information than a competition authority can reasonably be expected to have.

Cartels – time for clarity

With the Australian Competition Policy Review underway and as the Australian Competition and Consumer Commission seeks to expand the information disclosure prohibitions from the financial services industry to the Australian economy as a whole, it is timely to review the current state of Australia's cartel laws. The paper explores the policy justifications underpinning the, currently limited, prohibitions on information disclosure and their expansion to the broader economy. The authors conclude that there are many procompetitive reasons for and effects of information disclosure, such that the information disclosure prohibitions have the distinct possibility of stifling competitive conduct. Further, the kinds of information disclosure most likely to be anticompetitive are the types of conduct likely to be captured within the broader cartel prohibitions in any event. More broadly, the authors explore the existing Australian cartel prohibitions and conclude that these provisions have failed to achieve their objective of clarity and simplicity, with the recent decisions in the ANZ and Flight Centre cases demonstrating this failing.