Cartel Detection in Procurement Markets

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:http://ftp.zew.de/pub/zew-docs/dp/dp11066.pdf Non-technical summaryCartel detection is usually viewed as a key task of either competition authorities or compliance officials in firms with an elevated risk of cartelization. We argue that customers of hard core cartels can have both incentives and possibilities to detect such agreements on their own initiative through the use of market-specific data sets. We apply a unique data set of about 340,000 market transactions from 36 smaller and larger customers of German cement producers and show that a price screen -if it had been available at the time -would have allowed particularly larger customers to detect the upstream cement cartel before the competition authority. The results not only suggest that monitoring procurement markets through screening tools has the potential of substantial cost reductions -thereby improving the competitive position of the respective user firms -but also allow the conclusion that competition authorities should view customers of potentially cartelized industries as important allies in their endeavour to fight hard core cartels. Das Wichtigste in Kürze CARTEL DETECTION IN PROCUREMENT MARKETSKai Hüschelrath  and Tobias Veith  November 2011Abstract Cartel detection is usually viewed as a key task of either competition authorities or compliance officials in firms with an elevated risk of cartelization. We argue that customers of hard core cartels can have both incentives and possibilities to detect such agreements on their own initiative through the use of market-specific data sets. We apply a unique data set of about 340,000 market transactions from 36 smaller and larger customers of German cement producers and show that a price screen would have allowed particularly larger customers to detect the upstream cement cartel before the competition authority. The results not only suggest that monitoring procurement markets through screening tools has the potential of substantial cost reductions -thereby improving the competitive position of the respective user firms -but also allow the conclusion that competition authorities should view customers of potentially cartelized industries as important allies in their endeavour to fight hard core cartels. We are indebted to CDC Cartel Damage Claims (Brussels) for the provision of the data set and their cooperativeness in discussing our analyses and results. We are particularly grateful to Jakob Rü...

Estimating Damages from Price-Fixing - The Value of Transaction Data

“…Source: Hüschelrath and Veith (2011) As shown in Figure 3, the significance of public and private data moves to a far extent in the same direction. The further the period of the assumed structural break is shifted to the actual non-cartel period, the more significant the t-values become.…”

“…On the one hand, such an analysis might create additional value as contract terms might differ substantially between customers. On the other hand, it complicates analysis especially due to substantial variation in the purchasing patterns and purchasing quantities across customers (see Hüschelrath and Veith, 2011, for a detailed assessment in a cartel detection context).…”

The Impact of Cartelization on Pricing Dynamics - Evidence from the German Cement Industry

“…Although it is above the scope of this paper to develop a full-fledged market screening tool (see Hüschelrath and Veith, 2011), our results suggest that, first, price screens can be a helpful tool -for both antitrust authorities and customers of cartelized industries -in the detection of hardcore cartels. As shown above, prices (and variation coefficients) changed significantly after the breakdown of the cartel thereby providing possibilities to proactively detect such cartels.…”

Competition, Collusion and Spatial Sales Patterns - Theory and Evidence

“…A few other studies have also used parts of the transaction data which we use in the present article. study pricing patterns during and after the cartel; Hüschelrath and Veith (2014) investigate the workability of cartel screening methods, and Harrington et al (2015Harrington et al ( , 2016 investigate internal and external factors which might have destabilized the cartel.…”

“…For further information on the German cement cartel, see for instance Blum (2007); Friederiszick and Röller (2010); ; Hüschelrath and Veith (2014). the cement cartel in Germany, but was also part of a cartel in the concrete market.…”