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International Price-Fixing Cartels and Developing Countries: A Discussion of Effects and Policy Remedies

Author

Listed:
  • Lynda Oswald
  • Valerie Suslow
  • Margaret Levenstein
  • Manuel Pastor

Abstract

The U.S. Department of Justice, the European Commission, and the Organization for Economic Cooperation and Development have all recently voiced concern about international price-fixing cartels. The U.S. and European Union have increased prosecution of international cartels in the past decade, but very few developing countries have made similar enforcement efforts. If these cartels have significant effects on developing country consumers and producers, the lack of antitrust prosecutions by developing countries against these cartels is an important problem. Geographically limited prosecutions may not provide sufficient disincentives to deter collusion that has worldwide benefits for colluding firms. Ongoing prosecutions of international cartels by industrialized countries may open up markets for entry by developing country producers, but these efforts may be undermined if cartels create durable barriers to entry. Western governments are also susceptible to manipulation by domestic producers using tariff barriers and anti-dumping duties to protect the home market, both during and after the price-fixing conspiracy. Thus, developing countries may need to develop their own antitrust laws and enforcement capabilities to help deter international cartel activity. A recent ruling of the Second Circuit Court of Appeals also opens up the possibility that developing country consumers may be able to exact remedies in U.S. courts. In this paper we examine the possible effects of private international cartels on developing countries by looking in detail at three recent cartel cases, as well as at a broader cross-section of forty-two recently prosecuted international cartels. We discuss the indirect effects on developing country producers, either as competitors or co-conspirators, as well the direct effects of cartels on developing country consumers. By combining trade data with a sample of US and European prosecutions of international cartels in the 1990s, we are able to make a first attempt at quantifying the order of magnitude of the consequences of these cartels on developing countries as consumers. In 1997, the latest year for which we have trade data, developing countries imported $54.7 billion of goods from a sub-sample of 19 industries that had seen a price-fixing conspiracy during the 1990s. These imports represented 5.2% of total imports and 1.2% of GDP in developing countries.

Suggested Citation

  • Lynda Oswald & Valerie Suslow & Margaret Levenstein & Manuel Pastor, 2003. "International Price-Fixing Cartels and Developing Countries: A Discussion of Effects and Policy Remedies," Working Papers wp53, Political Economy Research Institute, University of Massachusetts at Amherst.
  • Handle: RePEc:uma:periwp:wp53
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    Cited by:

    1. Simon J. Evenett & Bernard M. Hoekman, 2006. "Economic Development and Multilateral Trade Cooperation," World Bank Publications, The World Bank, number 7412.
    2. Escrihuela-Villar, Marc, 2008. "Partial coordination and mergers among quantity-setting firms," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 803-810, May.
    3. 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.
    4. Hoekman, Bernard & Saggi, Kamal, 2007. "Tariff bindings and bilateral cooperation on export cartels," Journal of Development Economics, Elsevier, vol. 83(1), pages 141-156, May.
    5. van Bergeijk, P.A.G., 2009. "What could anti-trust in the OECD do for development?," ISS Working Papers - General Series 18720, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    6. John Connor & C. Gustav Helmers, 2006. "Statistics On Modern Private International Cartels, 1990-2005," Working Papers 06-11, Purdue University, College of Agriculture, Department of Agricultural Economics.
    7. Marc Deschamps, 2013. "Pourquoi des politiques de concurrence ?," GREDEG Working Papers 2013-23, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
    8. Hoekman, Bernard & Mavroidis, Petros C., 2002. "Economic development, competition policy, and the World Trade Organization," Policy Research Working Paper Series 2917, The World Bank.
    9. Hoekman, Bernard & Saggi, Kamal, 2003. "Trading Market Access for Competition Policy Enforcement," CEPR Discussion Papers 4110, C.E.P.R. Discussion Papers.
    10. Suha Alawi, 2014. "Corporate Governance and Cartel formation," Proceedings of Economics and Finance Conferences 0401246, International Institute of Social and Economic Sciences.
    11. 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.

    More about this item

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • F1 - International Economics - - Trade

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