Cartel Prohibition Research Articles

Does Enforcement of the Cartel Prohibition in Healthcare Reflect Public and Political Attitudes Towards Competition? A Longitudinal Study From the Netherlands

Abstract In market-based healthcare systems, due to the high and increasing degree of integration between healthcare providers and purchasers, the enforcement of the cartel prohibition is both important and ever more complex. Competition authorities operate independently, but their approach to enforcement may be influenced by the public and political context. Within the setting of the Dutch healthcare system, we study how the cartel prohibition was enforced between 2004 and 2020 and focus on whether a relationship with public and political attitudes towards competition in healthcare can be observed. Using both qualitative and sentiment analyses, we assessed 38 formal and informal documents issued by the competition authority, 126 written parliamentary questions and almost 1,500 newspaper articles. Our findings reveal that during the first half of the study period (2004–2012), ex-post punitive formal enforcement of violations of the cartel prohibition, such as market-sharing and price-fixing agreements, predominated. During the second half of the study period (2012–2020); however, the competition authority’s focus seems to have shifted toward providing ex-ante informal guidance. We clearly observe negative public and political attitudes towards competition in healthcare as well as a distinct shift in enforcement of the cartel prohibition in Dutch health care. However, we are not able to test for a causal relationship between both observations.

Cartel birth and death dynamics: Empirical evidence

This paper examines how a gradual tightening of antitrust enforcement impacts cartels’ births and deaths. To avoid the inherent sample selection bias in prosecuted cartel studies, we use a unique dataset of Swedish legal cartels registered between 1946 and 1993. We compare estimates from a count model (considering only registered cartels) and a Hidden Markov Model (allowing for potentially unregistered cartels) to identify observed and hidden cartel dynamics. The count model suggests that strengthening antitrust enforcement has a deterrent effect, but the Hidden Markov Model suggests otherwise. Despite stricter competition laws and a credible threat of cartel prohibition, cartels continue to form, but do so undercover. Additionally, our results suggest that the strengthening of competition law has little impact on destabilizing existing cartels.

Production agreements, sustainability investments, and consumer welfare

Schinkel and Spiegel (2017) finds that allowing sustainability agreements in which firms coordinate their investments in sustainability leads to lower investments and lower output. By contrast, allowing production agreements, in which firms coordinate output yet continue to compete on investments, boosts investments in sustainability and may also benefit consumers. We extend these results to the case where investments affect not only the consumers’ willingness to pay, but also marginal cost. We show that sustainability agreements continue to lower investments and output levels, while production agreements increase investments but when they benefit consumers, they are not profitable for firms and will therefore not be formed. This implies that exempting horizontal agreements from the cartel prohibition cannot be relied on to advance sustainability goals and satisfy the competition law requirement that consumers must not be worse off.

Horizontal Restraints on Platforms: How Digital Ecosystems Nudge into Rethinking the Construal of the Cartel Prohibition

This paper deals with collusive risks that can result from the ecosystems created by digital platforms. Recent case reports reflect that the potential for harm and benefit can be tightly interwoven here. It is not entirely clear, however, in what way the creation of a platform can, in itself, amount to a breach of the cartel prohibition, and how the potential for harm can be balanced against efficiencies in those cases. I argue in favour of an integrated construal of conduct and effect in order to close regulatory gaps whilst preventing false positives. algorithm, ancillary restraints, cartel, collusion, consumer welfare, digital economy, game theory, machine learning, oligopoly, platform

Anticompetitive Employment

Scholars, antitrust agencies, and policy makers have historically paid little attention to anticompetitive practices in labor markets. This was largely due a misconception that antitrust law is meant to govern conventional markets in which goods and services trade, rather than govern labor markets. Antitrust law may also offer a poor remedy to redress employers who enter no‐poaching agreements or otherwise impair competition. The primary tension involves antitrust's purpose, which is to promote “consumer welfare.” To identify whether conduct eroded consumer welfare, courts tend to scrutinize whether prices increased. But here, lessening wages can enable firms to sell goods at cheaper prices, benefiting consumers. Another issue is that the typical restraint affects only a smattering of workers instead of lessening wages throughout the greater market. This article uses empirical analyses to show that antitrust should promote labor's welfare as it does consumer welfare, and it argues that enforcement must condemn labor cartels as per se illegal. The research demonstrates that labor cartels are more pernicious than restraints in product markets, as employers can lessen wages with less effort than in product markets. Antitrust should even proscribe no‐poaching agreements formed for a legitimate purpose (e.g., to protect trade secrets) because employers could have achieved the same goals using less coercive means; the noncompete agreement, at least, provides labor with a semblance of notice and bargaining power without drawing antitrust scrutiny. The prohibition of labor cartels would thus promote competition and consumer welfare, especially in minimum wage labor markets.

On the Merging of Conduct and Effect: How Platform Competition Nudges into Rethinking the Construal of the Cartel Prohibition

This paper deals with collusive risks that can result from the ecosystems created by digital platforms. Recent case reports reflect that the potential for harm and benefit can be tightly interwoven here. It is not entirely clear, however, in what way the creation of a platform can, in itself, amount to a breach of the cartel prohibition, and how the potential for harm can be balanced against efficiencies in those cases. I argue in favor of an integrated construal of conduct and effect in order to close regulatory gaps whilst preventing false positives.

Characterizing Hard Core Cartels Under Article 101 TFEU

The prohibition of cartels embodies arguably the sole universal norm of global competition law. Yet a precise understanding of what constitutes a cartel remains elusive, a problem that is exacerbated in the context of Article 101 Treaty on the Functioning of the European Union by the Commission’s administrative enforcement procedures and the expansive approach to the “by object” category of restraints. This article aims to provide a more precise characterization of the hard core cartel concept as reflected in EU competition case law and practice and to explore why such conduct continues to constitute the “supreme evil” of contemporary antitrust enforcement.

Collaboration and Competition Policy in a Market-Based Hospital System: A Case Study from the Netherlands

Abstract In the Dutch healthcare system, provider competition is used as a tool to improve efficiency. From a competition policy perspective, little is known about how collaboration among healthcare providers contributes to overall patient welfare, and how a balance is achieved between scale benefits and preventing anti-competitive collusion. This paper examines the ex-post effects of a Dutch case study in which three competing hospitals have collaborated to provide high-complexity low-volume cancer surgery, an arrangement that tests the limits of permissibility under the Dutch cartel prohibition. Our preliminary empirical research demonstrated only a modest increase in price and travel time for some of the tumour surgeries. Volume analysis showed that the intended centralization of surgical procedures has not been fully realized. Our findings highlight the importance of a comprehensive self-assessment by the collaborating hospitals to ex-ante assess (potential) efficiencies and antitrust risks. Such self-assessments could benefit from research focused on which collaborations are most appropriate to achieve quality gains. For the ex-post assessment by competition authorities following the cartel prohibition, a more thorough insight into the (long-term) changes in hospital prices, profitability, and quality after collaboration is needed.

Corona and EU Economic Law: Competition and Free Movement in Times of Crisis

The outbreak of the coronavirus—and the responses of governments and businesses to combat the medical and economic crisis it entails—raise a number of urgent questions, many of which concern European economic law, i.e. the competition rules and free movement provisions. Can businesses cooperate to guarantee the supply of essential items or a vaccine notwithstanding the cartel prohibition of Article 101 TFEU? Is the excessive price doctrine of Article 102 TFEU a match for the price increases caused by hoarding behaviour? Can competition authorities continue to assess mergers, and might they even become more sympathetic to certain arguments such as the failing firm defence and industrial policy considerations? Under which conditions are Member States allowed to grant aid to undertakings that face economic difficulties due to the crisis? Can Member States prohibit the export of medical supplies to other Member States, and can they close their borders for European citizens? And how much freedom do public procurement rules leave governments to quickly conclude contracts for essential supplies? This article addresses these pressing questions in a comprehensive manner. It situates the numerous guidance documents adopted by the European Commission within the broader framework of EU economic law and then evaluates the compatibility of the public and private corona-related measures with that framework. The aim is to offer a legal guide for governments and businesses combatting the corona crisis.

Two cartel regimes. Swedish paper cartels and the EEC in the 1970s

ABSTRACT In 1973 Sweden entered into a free-trade agreement with the EEC. This meant that the EEC principle of prohibition of cartels met with the Swedish principle of abuse. Paper production was heavily cartelised in Sweden and Scandinavian export cartels exercised a strong influence over EEC markets. The problem is analysed in terms of legitimacy – how did the Swedish actors make their claims legitimate? When analysing the arguments used in the negotiations it becomes clear that the Swedish negotiators claimed that paper cartels and no tariffs provided more general utility whereas the EEC argument was that cartels were principally wrong and that the EEC utility was more important than the potential general utility. Since Sweden did not have the upper hand in the discussions the outcome became that the Scandinavian export cartels were formally dismantled and free trade for paper products had to wait for 11 years. When it comes to the actual effects, Swedish paper export could continue in much the same way as before. A process initiated by EC against the Scandinavian newspaper cartels ended up in a compromise founded on a common skepticism towards North American producers.

HARMFUL SIGNALS: CARTEL PROHIBITION AND OLIGOPOLY THEORY IN THE AGE OF MACHINE LEARNING

Abstract The traditional legal approach for distinguishing between illicit collusion and legitimate oligopoly conduct is to rely on criteria that relate to the means and form of how rivals interact, such as elements of “practical cooperation”, or on the finding of an anticompetitive intent. These criteria ultimately refer to the inner sphere of natural persons and its emanations in communicative acts. Some authors therefore conclude that the cartel prohibition of Article 101 Treaty on the Functioning of the European Union (TFEU) or Section 1 of the U.S. Sherman Act is unable to capture collusion if it is achieved by autonomously acting computers relying on machine learning capabilities. It is instead suggested here to define collusion as parallel informational signals, which achieve a supracompetitive equilibrium, and to use the consumer welfare standard as a proxy for distinguishing between illicit collusion and legitimate oligopoly conduct. This approach is not tantamount to the idea of prohibiting tacit collusion as such. Rather, it is to check singular elements of communication, that is, “informational signals”, within an existing oligopolistic setting for their propensity to create consumer harm. This approach can help to close potential regulatory gaps currently associated with the surge of algorithmic pricing.

Harmful Signals - Article 101 TFEU and Oligopoly Theory in the Age of Machine Learning

The classical legal approach for distinguishing between illicit collusion and legitimate oligopoly conduct is to rely on proxies, such as elements of “practical cooperation”, on “plus factors”, or on the finding of an anticompetitive intent among rival firms. These criteria ultimately relate to the inner sphere of natural persons and its emanations in communicative acts. Some authors therefore conclude that the cartel prohibition of Article 101 TFEU or Section 1 of the U.S. Sherman Act are unable to capture collusion if it is achieved by autonomously acting computers relying on machine learning capabilities. It is instead suggested here to define collusion as parallel informational signals, which achieve a supracompetitive equilibrium, and to use the consumer welfare standard as a proxy for distinguishing between illicit collusion and legitimate oligopoly conduct. This approach is not tantamount to the idea of prohibiting tacit collusion as such. Rather, it is to check singular elements of communication, i.e. “informational signals”, within an existing oligopolistic setting for their propensity to create a consumer harm. This approach can help to close potential regulatory gaps currently associated with the surge of algorithmic pricing.

The effective public enforcement of the prohibition of anti-competitive agreements: which factors influence the high percentage of annulments of Dutch cartel fines?

Abstract The Dutch enforcement of the European and Dutch cartel prohibition is characterized by high rates of litigation and successful litigation. Several studies have devoted attention to these phenomena, all unraveling parts of the puzzle as to how the occurrence of these percentages can be explained. The subject of this article, an analysis of the factors which influence the rate of successful litigation, is however missing in this body of literature. To begin with, a theoretical framework of possible influencing factors is designed on the basis of relevant academic literature. In order to evaluate whether the factors identified in the literature can explain the Dutch practice, an assessment is carried out using several means, including a further analysis of the Dutch cartel practice, interviews with involved stakeholders, and comparisons with other Member States and Dutch market supervisors. The article concludes that specific factors that are woven into the Dutch practice (including specific court, party, and case characteristics), in combination with the nature of competition law, influence the Dutch annulment rate.

The Interaction of Public and Private Cartel Enforcement

The prohibition of cartels is enforced by both public and private legislation, which may interact in a way that reduces their effectiveness. This article investigates these interaction effects specifically for the leniency programme and civil damages claims, by means of a conjoint analysis. Dutch companies and competition lawyers were faced with different enforcement situations containing a mix of public and private enforcement elements and were asked in which case they were most likely to apply for leniency. Their answers are analysed with a nested logit model, allowing for the possibility that respondents would continue the cartel in either of the presented enforcement situation. For firms, the corporate and personal fine and the fine reduction mattered in deciding to apply for leniency. Competition lawyers took the fine reduction, disclosure of leniency and burden of proof into account when advising on self-reporting the agreement. Both groups of respondents answered that in 16–19% of the situations they would continue the agreement and not apply for leniency/advice to so do (The authors thank the participating economists of the Dutch Competition Authority for their input and suggestions. Special thanks to Dr Ron Kemp, the competition lawyers who were willing to discuss the research results with the authors, prof. Dr Barbara Baarsma and prof. Dr Bas ter Weel.).

The Effectiveness of Dutch Cartel Fines Analysed on the Basis of the Judgments of the Two Specialised Dutch Courts

This article discusses the effective public enforcement of the cartel prohibition in the Netherlands on basis of a comparison of the ACM fining decisions, district court judgments and TIAT judgments.

Damages for Delay: The EU Held Liable for Harm Caused by ‘Unjustified Inactivity’ in General Court Proceedings

In a series of recent judgements the General Court ruled on the non-contractual liability of the Court of Justice of the European Union (‘CJEU’). In three of those cases the General Court held the CJEU liable for damages caused by delayed proceedings and awarded the applicants compensation for material and immaterial damages. While the non-contractual liability of the institutions of the European Union is a well-established principle of EU law, this was the first time this principle was applied to the CJEU itself. Each of Gascogne,1Kendrion,2Aalberts,3 and Aspla4 concerned applications by parties that had been subject to a decision by the European Commission finding a violation of Article 101 TFEU (the cartel prohibition) and that had appealed the Commission's decision to the General Court. The parties in Gascogne, Kendrion, and Aspla had all been involved in the Industrial Bags cartel proceedings,5 in which the General Court took almost six years to dismiss the appeals. In separate proceedings to claim compensation for the damages caused by the alleged delay in these appeal proceedings, the General Court ruled in favour of the applicants and awarded damages for the EU's non-contractual liability.

What's Wrong with Cartels?

Cartels have a significantly negative impact on economic welfare. Anti-cartel competition law–such as the provisions of pt IV div 1 of the Competition and Consumer Act 2010 (Cth)–tries to tackle this negative impact through civil and criminal remedies. The prohibition of cartels is most commonly justified on economic grounds. However, reference is also often made to broader moral grounds for proscribing cartels–for example, it is commonly stated that cartels are deceptive, unfair or engaged in a form of cheating. This article advances a unified account of the moral status of cartels that integrates both economic and moral factors. It does so by emphasising the relationship of cartel behaviour to the moral duty to promote the common good. Cartels are wrong because they undermine the role of open and competitive markets as a salient response to an important social coordination problem in a way that leads to seriously harmful economic outcomes. This combination of factors supplies a robust justification for both civil and criminal sanctions in appropriate cases, thereby affording a principled foundation for the current framework of cartel regulation in Australia.

The Application of EU Competition Law in the Energy Sector

Another year has passed in which the European Commission announced that an integrated energy market for all European Union (EU) Member States is closer than ever before.1 And yet, in 2015, a functioning single European energy market has not been fully accomplished.2 Further regulatory measures have been considered necessary and have been promoted by the Commission and national regulators, now under the banner of the ‘Energy Union’ of the Juncker Commission. This ‘Energy Union’ marks another milestone in the development of the regulatory framework of energy markets in the EU. It has become one of the top three political priorities of the Commission and is prominently represented by the Commission's Vice-President Maroš Šefčovič and Commissioner for Climate Action and Energy, Miguel Arias Cañete. In 2015, a key focus of the Commission's activities was the enforcement of EU State aid rules, most importantly with regard to national subsidy measures for energy generated from renewable resources (renewable energies) and so-called capacity mechanisms, which several Member States implemented to close perceived gaps in their electricity supply. National regulators remained the main drivers of the enforcement of competition law in terms of prohibition of cartels and abusive behaviour.

A veritable tower of Babel: on the confusion between the legal and economic interpretations of Article 101(3) of the Treaty on the Functioning of the European Union

The current system of exemptions from the cartel prohibition (Article 101(3) TFEU) is a veritable tower of Babel. For one, there is a considerable confusion of tongues between jurists and economists on the goal of competition law. Moreover, the European Commission's Guidelines on the application of the cartel prohibition explain the law differently from what is apparent from the case law. This economic paper aims to reduce the confusion of tongues by answering questions such as: what is consumer welfare, what is public interest, and should non-competition public interests be included in the assessment of competition cases? Actual cases are used to show the terminology of competition and other public interests. We develop a framework for balancing the economic benefits produced by restrictive agreements against the restrictive effects of these agreements.

Containing Corporatism: EU Competition Law and Private Interest Government

Corporatism, or private interest government, raises objections both from a democratic and from an economic perspective. This paper examines the application of EU competition law to private rule making that is purportedly in the public interest. Earlier case law holding Member States responsible for anticompetitive delegation (Van Eycke) can be contrasted with case law that focuses on the inherent restrictions of the pursuit of public policy aims and keeps some private arrangements outside the scope of the cartel prohibition altogether (Wouters). More recently we can identify an approach where the public and private activities of entities are considered separately (SELEX). The 2014 ONP Case is an example where the General Court distinguishes private and public interests, and takes a tough line where the limits of the latter are exceeded. Corporatism is therefore, to some extent, contained by EU competition law. However, there is a related trend toward taking account of public interest requirements in antitrust under the directly applicable exemption provision of Article 101(3) TFEU. Alongside the abovementioned Wouters approach that requires balancing under Article 101(1) TFEU, and given the context of the decentralisation of EU antitrust law, this raises a risk of fragmentation that remains to be addressed.