Hub-and-spoke Collusion: Some Nagging Questions Raised by Economists

Cayseele, Patrick J. G. Van

doi:10.1093/jeclap/lpt082

Cited by 12 publications

(12 citation statements)

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“…Hub-and-spoke cartels have long been recognized as a phenomenon in economic and legal circles, so there is an existing body of research work, though it is slim. Odudu (2011), Walckiers (2013, 2014), Zampa and Buccirossi (2013), Van Cayseele (2014), and Orbach (2016 raise some a The first year of operation was the first year in which there was evidence of communication relevant to collusion. The last year of operation was either when there was evidence that the firms were no longer coordinating or, when that evidence was absent, the year of the first judicial decision ruling against the cartel.…”

Section: Approach and Overviewmentioning

confidence: 99%

Hub-and-Spoke Cartels

Garrod¹,

Harrington²,

Olczak³

2021

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The first comprehensive economic and legal analysis of hub-and-spoke cartels, with detailed case studies. A cartel forms when competitors conspire to limit competition through coordinated actions. Most cartels are composed exclusively of firms that would otherwise be in competition, but in a hub-and-spoke cartel, those competitors (“spokes”) conspire with the assistance of an upstream supplier or a downstream buyer (“hub”). This book provides the first comprehensive economic and legal analysis of hub-and-spoke cartels, explaining their formation and how they operate to create and sustain a collusive environment. Sixteen detailed case studies, including cases brought against toy manufacturer Hasbro and the Apple ebook case, illustrate the economic framework and legal strategies discussed. The authors identify three types of hub-and-spoke cartels: when an upstream firm facilitates downstream firms to coordinate on higher prices; when a downstream intermediary facilitates upstream suppliers to coordinate on higher prices; and when a downstream firm facilitates upstream suppliers to exclude a downstream rival. They devote a chapter to each type, discussing the formation, coordination, enforcement, efficacy, and prosecution of these cartels, and consider general lessons that can be drawn from the case studies. Finally, they present strategies for prosecuting hub-and-spoke collusion. The book is written to be accessible to both economists and lawyers, and is intended for both scholars and practitioners.

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Section: Approach and Overviewmentioning

confidence: 99%

Hub-and-Spoke Cartels

Garrod¹,

Harrington²,

Olczak³

2021

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“…EC AT.39847 Ebooks case: https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=1_39847. 5 Hub and spoke cartels, also known as ABC collusion, refer to multiple vertical cooperation between a common supplier (the hub or B) and two or more retailers (the spokes or A and C) leading to unlawful horizontal behavior in the downstream market (Van Cayseele, 2014). 6 Speech on Exclusionary Vertical Agreements from the Antitrust Division of the US DoJ, April 1998.…”

Section: Introductionmentioning

confidence: 99%

“…Using different linear demand systems for differentiated goods, the models derive the conditions under which the manufacturer has incentives to facilitate collusion. Building on Van Cayseele and Miegielsen (2013), our model includes these conditions in a dynamic setting, considering also the manufacturer's ability to use an embargo threat on the retailers should they decide to deviate, to explore the effect of a leniency program.…”

Section: Introductionmentioning

confidence: 99%

“…13 In this paper we develop a dynamic model to examine the impact of ex-ante leniency programs on hub and spoke cartels. To do so, we draw on earlier academic work of Van Cayseele and Miegielsen (2013) on hub and spoke cartels and Chen and Ray's dynamic leniency model for horizontal cartels (2013) that we adapt to the hub and spoke and Cournot setting. We show that it is always desirable to offer some ex-ante leniency to the first-reporting hub and spoke cartel member to discourage cartel formation and assess the optimal leniency rate for both the hub and spokes.…”

Section: Introductionmentioning

confidence: 99%

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Leniency Policy in Hub and Spoke Cartels

Rutten,

Vennet,

Buts

et al. 2023

Preprint

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The competition literature documents that leniency programs can either destabilize or reinforce the sustainability of horizontal cartels. We contribute to this body of literature by looking at a specific type of cartels, namely hub and spoke cartels: horizontal collusions between spokes facilitated by, at least, one party operating at a different level of the supply chain, the hub. Drawing on earlier work of Van Cayseele and Miegielsen (2013) on hub and spoke cartels, and Chen and Rey’s dynamic leniency model for horizontal cartels (2013), this paper builds a model that measures the impact of leniency programs on hub and spoke cartels. We show that it is always desirable to offer some ex-ante leniency to the first-reporting hub-and-spoke cartel member to discourage cartel formation and assess the optimal leniency rate for both the hub and spokes. We then compare these results with the situation where the hub is excluded from the leniency program and argue that including the hub increases this program’s efficiency in discouraging cartel formation, suggesting that EU leniency programs (which allow the ringleader to benefit from leniency) are more effective than US ones (which do not).

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“…See alsoSahuguet and Walckiers (2014),Miegielsen (2014), andGarrod, Harrington, andOlczak (2020) for discussion.…”

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confidence: 99%