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

Author

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  • Herold Daniel

    (Justus-Liebig-University Giessen, Licher Strasse 62, 35394Giessen, Germany)

  • Paha Johannes

    (Justus-Liebig-University Giessen, Licher Strasse 62, 35394Giessen, Germany)

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.

Suggested Citation

  • Herold Daniel & Paha Johannes, 2018. "Cartels as Defensive Devices: Evidence from Decisions of the European Commission 2001–2010," Review of Law & Economics, De Gruyter, vol. 14(1), pages 1-31, March.
    • Handle: RePEc:bpj:rlecon:v:14:y:2018:i:1:p:31:n:2
    DOI: 10.1515/rle-2016-0035
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    References listed on IDEAS

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    1. 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.
    2. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    3. Harrington, Joseph E., 2006. "How Do Cartels Operate?," Foundations and Trends(R) in Microeconomics, now publishers, vol. 2(1), pages 1-105, August.
    4. Fabra, Natalia, 2006. "Collusion with capacity constraints over the business cycle," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 69-81, January.
    5. Joseph E. Harrington, Jr, 2006. "How Do Cartels Operate?," Economics Working Paper Archive 531, The Johns Hopkins University,Department of Economics.
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    Cited by:

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    2. Willem H. Boshoff & Johannes Paha, 2021. "List Price Collusion," Journal of Industry, Competition and Trade, Springer, vol. 21(3), pages 393-409, September.
    3. Button, Kenneth & Porta, Flavio & Scotti, Davide, 2020. "The role of strategic airline alliances in Africa," MPRA Paper 108265, University Library of Munich, Germany.

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    More about this item

    Keywords

    cartel formation; case study; collusion;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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