IDEAS home Printed from https://ideas.repec.org/a/kap/jincot/v14y2014i4p487-509.html
   My bibliography  Save this article

The South African Wheat Flour Cartel: Overcharges at the Mill

Author

Listed:
  • Liberty Mncube

Abstract

This paper analyses the South African flour cartel, active from 1999 to 2007 and provides an overcharge estimation by using comparator based methods. The empirical analysis is complemented by a descriptive overview of the history and structure of the South African flour industry. The flour cartel fixed the price of flour and allocated customers from 1999 to 2007. We find that the overcharges to independent bakeries range from 7 % to 42 %. We also show that the cartel profits were approximately two times higher during the cartel than the price war year 2002 or the post collusion year 2008. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Liberty Mncube, 2014. "The South African Wheat Flour Cartel: Overcharges at the Mill," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 487-509, December.
  • Handle: RePEc:kap:jincot:v:14:y:2014:i:4:p:487-509
    DOI: 10.1007/s10842-013-0172-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10842-013-0172-y
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s10842-013-0172-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Giliola Frey & Matteo Manera, 2007. "Econometric Models Of Asymmetric Price Transmission," Journal of Economic Surveys, Wiley Blackwell, vol. 21(2), pages 349-415, April.
    2. Emmanuel Combe & Constance Monnier & Renaud Legal, 2008. "Cartels: The Probability of Getting Caught in the European Union," Bruges European Economic Research Papers 12, European Economic Studies Department, College of Europe.
    3. James F. Nieberding, 2006. "Estimating overcharges in antitrust cases using a reduced-form approach: Methods and issues," Journal of Applied Economics, Universidad del CEMA, vol. 9, pages 361-380, November.
    4. John M. Connor, 2004. "Global Antitrust Prosecutions of Modern International Cartels," Journal of Industry, Competition and Trade, Springer, vol. 4(3), pages 239-267, September.
    5. David Genesove & Wallace P. Mullin, 2001. "Rules, Communication, and Collusion: Narrative Evidence from the Sugar Institute Case," American Economic Review, American Economic Association, vol. 91(3), pages 379-398, June.
    6. Lars-Hendrik Röller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, vol. 96(1), pages 321-338, March.
    7. John Asker, 2010. "A Study of the Internal Organization of a Bidding Cartel," American Economic Review, American Economic Association, vol. 100(3), pages 724-762, June.
    8. Michela Cutts & Johann Kirsten, 2006. "Asymmetric Price Transmission And Market Concentration: An Investigation Into Four South African Agro‐Food Industries," South African Journal of Economics, Economic Society of South Africa, vol. 74(2), pages 323-333, June.
    9. Meyer, Ferdinand H. & Kirsten, Johann F., 2005. "Modelling the wheat sector in South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 44(2), pages 1-13, June.
    10. Joseph E. Harrington, 2004. "Post‐Cartel Pricing During Litigation," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 517-533, December.
    11. Jochen Meyer & Stephan von Cramon‐Taubadel, 2004. "Asymmetric Price Transmission: A Survey," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 581-611, November.
    12. Leonardo J. Basso & Thomas W. Ross, 2010. "Measuring The True Harm From Price‐Fixing To Both Direct And Indirect Purchasers," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 895-927, December.
    13. Xavier Vanssay & Can Erutku, 2011. "Damage at the Pump: Does Punishment Fit the Crime?," Journal of Industry, Competition and Trade, Springer, vol. 11(4), pages 351-367, December.
    14. Robert H. Porter, 1983. "A Study of Cartel Stability: The Joint Executive Committee, 1880-1886," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 301-314, Autumn.
    15. Robert H. Porter & J. Douglas Zona, 1999. "Ohio School Milk Markets: An Analysis of Bidding," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 263-288, Summer.
    16. J. A. Groenewald, 1964. "The Effects On National Economic Welfare Of Economic Interference In Favour Of Agriculture," South African Journal of Economics, Economic Society of South Africa, vol. 32(4), pages 283-293, December.
    17. Glenn Ellison, 1994. "Theories of Cartel Stability and the Joint Executive Committee," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 37-57, Spring.
    18. Liberty Mncube, 2013. "Strategic Entry Deterrence: Pioneer Foods And The Bread Cartel," Journal of Competition Law and Economics, Oxford University Press, vol. 9(3), pages 637-654.
    19. Robert H. Bork & J. Gregory Sidak, 2013. "The Misuse Of Profit Margins To Infer Market Power," Journal of Competition Law and Economics, Oxford University Press, vol. 9(3), pages 511-530.
    20. Tembinkosi Bonakele & Liberty Mncube, 2012. "Designing Appropriate Remedies For Competition Law Enforcement: The Pioneer Foods Settlement Agreement," Journal of Competition Law and Economics, Oxford University Press, vol. 8(2), pages 425-447.
    21. James F. Nieberding, 2006. "Estimating Overcharges in Antitrust Cases Using a Reduced-Form Approach: Methods and Issues," Journal of Applied Economics, Taylor & Francis Journals, vol. 9(2), pages 361-380, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Willem H. Boshoff, 2015. "Illegal Cartel Overcharges in Markets with a Legal Cartel History: Bitumen Prices in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 83(2), pages 220-239, June.
    2. Wawa W. Nkosi & Willem H. Boshoff, 2022. "Characteristics of Prosecuted Cartels and Cartel Enforcement in South Africa," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(3), pages 327-360, May.
    3. World Bank Group, 2016. "South Africa Economic Update, February 2016," World Bank Publications - Reports 23762, The World Bank Group.
    4. Willem H. Boshoff, 2021. "South African competition policy on excessive pricing and its relation to price gouging during the COVID‐19 disaster period," South African Journal of Economics, Economic Society of South Africa, vol. 89(1), pages 112-140, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hüschelrath, Kai & Veith, Tobias, 2011. "The impact of cartelization on pricing dynamics: Evidence from the German cement industry," ZEW Discussion Papers 11-067, ZEW - Leibniz Centre for European Economic Research.
    2. Ari Hyytinen & Frode Steen & Otto Toivanen, 2019. "An Anatomy of Cartel Contracts," The Economic Journal, Royal Economic Society, vol. 129(621), pages 2155-2191.
    3. Bolotova, Yuliya & Connor, John M. & Miller, Douglas J., 2008. "The impact of collusion on price behavior: Empirical results from two recent cases," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1290-1307, November.
    4. Ari Hyytinen & Frode Steen & Otto Toivanen, 2018. "Cartels Uncovered," American Economic Journal: Microeconomics, American Economic Association, vol. 10(4), pages 190-222, November.
    5. Robert Clark & Decio Coviello & Jean-Fran�ois Gauthier & Art Shneyerov, 2018. "Bid Rigging and Entry Deterrence in Public Procurement: Evidence from an Investigation into Collusion and Corruption in Quebec," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(3), pages 301-363.
    6. Granlund, David & Rudholm, Niklas, 2023. "Calculating the probability of collusion based on observed price patterns," Umeå Economic Studies 1014, Umeå University, Department of Economics, revised 13 Oct 2023.
    7. Clark, Robert & Fabiilli, Christopher & Lasio, Laura, 2022. "Collusion in the US generic drug industry," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    8. Jorge Alé‐Chilet & Juan Pablo Atal, 2020. "Trade associations and collusion among many agents: evidence from physicians," RAND Journal of Economics, RAND Corporation, vol. 51(4), pages 1197-1221, December.
    9. Clark, Robert & Coviello, Decio & de Leverano, Adriano, 2020. "Complementary bidding and the collusive arrangement: Evidence from an antitrust investigation," ZEW Discussion Papers 20-052, ZEW - Leibniz Centre for European Economic Research.
    10. Robert Clark & Ignatius Horstmann & Jean-François Houde, 2021. "Hub and Spoke Cartels: Theory and Evidence from the Grocery Industry," NBER Working Papers 29253, National Bureau of Economic Research, Inc.
    11. Porter, Robert H., 2020. "Mergers and coordinated effects," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    12. Rieko Ishii, 2014. "Bid Roundness Under Collusion in Japanese Procurement Auctions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(3), pages 241-254, May.
    13. Tsay, Wen-Jen, 2021. "Estimating cartel damages with model averaging approaches," International Review of Law and Economics, Elsevier, vol. 68(C).
    14. Kai Hüschelrath & Kathrin Müller & Tobias Veith, 2013. "Concrete Shoes For Competition: The Effect Of The German Cement Cartel On Market Price," Journal of Competition Law and Economics, Oxford University Press, vol. 9(1), pages 97-123.
    15. Pedro Mendi & Róbert F. Veszteg, 2009. "Sustainability of collusion: evidence from the late 19th century basque iron and steel industry," Investigaciones Economicas, Fundación SEPI, vol. 33(3), pages 385-405, September.
    16. Nikolaus Fink & Philipp Schmidt-Dengler & Konrad Stahl & Christine Zulehner, 2017. "Registered cartels in Austria: an overview," European Journal of Law and Economics, Springer, vol. 44(3), pages 385-422, December.
    17. Danial Asmat, 2021. "Collusion Along the Learning Curve: Theory and Evidence From the Semiconductor Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 69(1), pages 83-108, March.
    18. Mitsuru Igami & Takuo Sugaya, 2022. "Measuring the Incentive to Collude: The Vitamin Cartels, 1990–99," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(3), pages 1460-1494.
    19. Elena Claire Ricci & Massimo Peri & Lucia Baldi, 2019. "The Effects of Agricultural Price Instability on Vertical Price Transmission: A Study of the Wheat Chain in Italy," Agriculture, MDPI, vol. 9(2), pages 1-14, February.
    20. Kai Hüschelrath & Tobias Veith, 2014. "Cartel Detection in Procurement Markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 35(6), pages 404-422, September.

    More about this item

    Keywords

    Competition policy; Cartels; Overcharges; L13; L40; L41; L66;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jincot:v:14:y:2014:i:4:p:487-509. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.