Concrete Shoes for Competition: The Effect of the German Cement Cartel on Market Price

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. Non-technical summarySince 2004, the European Commission (EC) has taken a number of steps to develop a legal framework that allows victims of EU antitrust infringements to obtain compensation. In its Green Paper on damages actions for breach of antitrust rules, the EC ( Although the public and academic discourse on the various methods and models to estimate damages certainly is a necessary step in the process of strengthening antitrust damages actions, the challenges of applying them in actual cases with real-world data are often ignored. Given the fact that the final damage value basically is a function of the demanded quantities of the cartelized product and the cartel-induced increase in price, it becomes apparent that especially the robust estimation of the so-called price overcharge is crucial for a coherent and welfare-improving private enforcement of anti-cartel rules.Against this background, we use publicly available price data from a German cement cartel to estimate the achieved price overcharge. In particular, we apply two different comparatorbased approaches -a 'before-and-after' approach and a 'difference-in-differences' approachand especially study the impact of various assumptions on the transition period from the cartel period to the non-cartel period on the estimated price overcharge. We find that the cartel managed to implement price increases in a range from 20.3% (extended approach with instrumented cement demand) to 20.7% (basic approach) for the 'before-and-after' method and from 26.2% (pooled OLS) to 26.5% (random-effects) for the 'difference-in-differences' method. For the (extended) 'before-and-after' approach, we further show that various assumptions on the transition period from the cartel period to the non-cartel period have a significant impact on the estimated price overcharge. Das Wichtigste in Kürze AbstractWe use publicly available price data from the German cement industry to estimate the cartelinduced price increase. We apply two different comparator-based approaches -the 'beforeand-after' approach and the 'difference-in-differences' approach -and especially study the impact of various assumptions on the transition period from the cartel period to the non-cartel period on the overcharge estimate. We find that the cement cartel led to price overcharges in a range from 20.3 to 26.5 percent depending on model approach and model assumptions.

Illegal Cartel Overcharges in Markets with a Legal Cartel History: Bitumen Prices in South Africa

“…The determination of a “but for” price faces an identification problem: prices, even under cartels, are affected by demand and cost conditions, and the modeller must isolate the effect of the cartel from these other effects. The literature suggests three broad approaches to solving this problem: a comparator‐based approach, a financial analysis‐based approach and a market structure‐based approach (Hüschelrath et al ., ). Comparator‐based approaches solve the identification problem by comparing prices during the cartel period with prices from a comparable market not characterised by cartel activity, or for the same market but for a competitive period.…”

“…Market structure‐based approaches rely on fitting industrial organisation models to market data and then using the theoretical predictions from these models to estimate “but for” outcomes. Financial analysis‐ and market structure‐based approaches are used less often, mostly due to their complexity and the problems related to the measurement of profitability (Hüschelrath et al ., ). This paper, therefore, focuses on comparator‐based approaches, which dominate in practice.…”

“…DID analysis involves a comparison of the differences in prices between the market under investigation and the comparator market(s) before and during the cartel. The difference between the differences for the pre‐cartel and cartel period is then an estimate of the price overcharge (Hüschelrath et al ., ).…”

Legal and Illegal Cartels in the European Cement Industry

“…Another case which we will also consider, the illegal German cement cartel, is discussed by Hüschelrath and Veith (2011) as well as Hüschelrath, Müller and Veith (2013). Both papers, as well as the manual for estimating a cartel's damage using the example of the German cement case provided in Hüschelrath, Leheyda, Müller and Veith (2012) supply us with some details on the case, although these works focus on a particular issue rather than getting the overall picture of how a cartel operates.…”

The Impact of Reforms and Privatization on Firms’ Conduct in the Presence of Interconnected Conglomerates and Weak and Inefficient Regulatory Institutions

“…Authors such as Rosenbaum and Sukharomana (), Zeidan and Resende (), Salvo (), Çelen and Gunalp (), Bejger () and Hüschelrath et al. () have evaluated the industry's competitive conditions and collusive practices. But interestingly, the majority of these studies are related to the relatively high income countries with established and strong regulatory institutions.…”