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Deterrence Effects of Korean Antitrust Enforcement on Producer Prices and Profit Margins

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  • Robert M. Feinberg
  • Minsoo Park

Abstract

Antitrust enforcement is well established in Korea, yet there has been little study of its effectiveness. John Connor, however, noted that “the Korean [Fair Trade Commission] has the best record of anti-cartel enforcement in Asia.”1 In this article, we examine several datasets to investigate whether antitrust enforcement in Korea, especially anti-cartel activity, has had a price-limiting impact over the past couple of decades. We compare the behavior of firms and industries that have been subject to antitrust investigation to those that have not. We examine the response of the firms and industries under antitrust investigation following the cases. The results presented here are consistent across two very different data sets of indicators for the Korean economy. The results suggest that long-term deterrence is unlikely to be observed from antitrust investigations, although the impact on short-term price and profit margin may be expected. However, the stronger effects observed suggest that firms in Korea have begun to pay more attention to the actions of the Korean Fair Trade Commission (KFTC) over the past decade since the more rigorous enforcement of antitrust.
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  • Robert M. Feinberg & Minsoo Park, 2014. "Deterrence Effects of Korean Antitrust Enforcement on Producer Prices and Profit Margins," Working Papers 2014-07, American University, Department of Economics.
  • Handle: RePEc:amu:wpaper:2014-07
    DOI: 10.17606/rdqv-7375
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    1. Jarig Sinderen & Ron Kemp, 2008. "The Economic Effect Of Competition Law Enforcement: The Case Of The Netherlands," De Economist, Springer, vol. 156(4), pages 365-385, December.
    2. John Connor, 2006. "Effectiveness of Antitrust Sanctions on Modern International Cartels," Journal of Industry, Competition and Trade, Springer, vol. 6(3), pages 195-223, December.
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    4. Gregory Werden, 2008. "Assessing the Effects of Antitrust Enforcement in the United States," De Economist, Springer, vol. 156(4), pages 433-451, December.
    5. Robert M. Feinberg, 1986. "The Effects of European Competition Policy on Pricing and Profit Margins," Kyklos, Wiley Blackwell, vol. 39(2), pages 267-287, May.
    6. Robert M. Feinberg, 1985. "The Enforcement and Effects of European Competition Policy: Results of a Survey of Legal Opinion," Journal of Common Market Studies, Wiley Blackwell, vol. 23(4), pages 373-384, June.
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    Cited by:

    1. Robert M. Feinberg & Hyunchul Kim & Minsoo Park, 2016. "The Determinants of Cartel Duration in Korea," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(4), pages 433-448, June.
    2. Stefania Grezzana, 2016. "Lost In Time And Space: The Deterrence Effect Of Cartel Busts On The Retail Gasoline Market," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 158, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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