Cartels as Defensive Devices: Evidence from Decisions of the European Commission 2001–2010

Abstract

Why would an industry that was not colluding yesterday start colluding today? This article distills insights about cartel formation from 41 cases prosecuted by the European Commission between 2001 and 2010. The case studies examine the events occurring prior to the cartels’ set-up. Cartel formation is affected by changes in prices, demand and customer conduct, capacity utilization, increased imports and entry by competitors, as well as events in the legal and regulatory environment of the firms. Yet, none of these factors serves as a good marker of cartel formation when being regarded in isolation. It rather needs to be analyzed how changes in these factors interact and whether they raise the intensity of competition. In this context, factors that are commonly deemed to destabilize cartels, like entry of new competitors or buyer power, are found to actually foster cartel formation.

List Price Collusion

“…Our article adds to the case study literature on collusion (for example, Grout and Sonderegger 2005;Harrington 2006;Herold and Paha 2018) by presenting evidence of list price collusion. We review economic features of cases decided by competition authorities and courts both in Europe and the USA to emphasize the relevance of list price collusion and to highlight that this practice deserves greater attention in the economics literature.…”

“…8 We found case evidence by searching LexisNexis for U.S. antitrust cases where the keyword "list price" showed up prominently. The same procedure was applied to the decisions published on the European Commission's website, where we focused especially on cartels whose formation had previously been studied by Herold and Paha (2018). Therefore, the presented cases constitute anecdotal evidence and should not be interpreted statistically in the sense of certain practices occurring more frequently than others.…”