Cartels, Antitrust Enforcement, and Industry Performance : Evidence from Mexico

Forty percent of economic activities in Mexico weighed by sales have been investigated forillegal monopolistic practices since the Federal Competition Commission was established in 1993. By exploiting someunique features of the Mexican investigative system, and using a synthetic control approach, this paper examines thecausal impact of antitrust sanctions on industry performance and aggregate outcomes. Sanctions cause sales and wages toincrease and profit margins to fall in the sanctioned sectors, thus benefiting consumers and workers. Overall,antitrust enforcement contributes roughly half a percent of per capita gross domestic product growth. Outcomes ofinvestigations that are closed without sanction fail to reject the hypothesis that some harmful conduct is notsanctioned because investigators lack resources to prove it conclusively. An implication is that the Commission couldgenerate greater benefits with additional investigative resources.