How can you compensate consumers for all the harm they suffered from a price-fixing cartel? Nicole Rosenboom of SEO Amsterdam Economics (SEO) argues that current economic models for calculating private damages claims underestimate the actual harm.
Ms. Rosenboom was one of the speakers at the symposium Cartels: insights on fines and enforcement, held on May 22, 2018, and organized by the Netherlands Authority for Consumers and Markets (ACM). At the symposium, scholars from the Netherlands and abroad shared their latest insights into cartels, fines, and consumer harm.
Cartel fines were the main topic of the first afternoon session. David Ulph (University of St. Andrews) discussed his study into cartel fines. He argued in favor of not just linking cartel fines to the turnovers of the firms involved, but also to overcharges. That has a deterrent effect, and, moreover, it results in positive welfare effects.
Evgenia Motchenkova (VU University Amsterdam) gave a presentation about the effect of private damages claims on the level of the cartel price. Her study revealed that, while damages claims do have a deterrent effect, at the same time, they can also have an upward effect on prices. Her proposed solution is an alternative model for calculating the harm.
Enforcement in the EU
Michael Hellwig (ZEW Centre for European Economic Research) presented the results of his study into anti-cartel enforcement in the EU. Cartels have, on average, seven participants, and the average cartel fine is EUR 230 million. Cartels last, on average, seven years. Cartels last shorter if the participating undertakings are located in multiple countries. Leniency programs do have an effect: cartels last shorter in countries where leniency programs are in place.
- Cartel Cases and the Cartel Enforcement Process in the European Union 2001–2015
- When do firms leave cartels? Determinants and the impact on cartel survival
Determining the effect of cartels on consumer welfare
Finally, Ms. Rosenboom discussed the calculation of the different types of harm suffered from cartels. Besides the direct harm caused by the price increase, consumers also suffer harm because they can choose from fewer products or none at all. By taking into account these effects, the actual effect on consumer welfare can be calculated more accurately.
ACM regularly organizes meetings and events, where scholars share their knowledge and take part in discussions. In this way, ACM hones its methods and effectiveness by incorporating the latest scientific insights, and, conversely, academia can compare their findings with real-life results.