This presentation by Simon Roberts, Professor, Centre for Competition, Regulation and Economic Development, University of Johannesburg, was made during the discussion “Use of Economic Evidence in Cartel Cases” held at the 22nd meeting of the OECD Global Forum on Competition on 8 December 2023. More papers and presentations on the topic can be found out at oe.cd/egci.
This presentation was uploaded with the author’s consent.
Use of Economic Evidence in Cartel Cases – ROBERTS – December 2023 OECD discussion
1. OECD Global Forum Breakout Session:
How can competition agencies use economic evidence
in their enforcement work
Simon Roberts
Centre for Competition, Regulation & Economic Development,
University of Johannesburg
www.competition.org.za ; sroberts@uj.ac.za
8 December 2023
2. • Info exchange may, in itself, result in reduced competition
• What information? Prices, quantities?
• Focus often on price (see CTFTC), but information which enables
tracking of market shares may dampen price competition
• Remember, cartellists are trying to find second-best solutions to
the challenges of coordination
• Reaching agreement? an understanding which replaces
independent action
• Monitoring: information exchange can be essential
• Ability to punish deviation
• Back to basic economics: learning from cement?
Economic evidence & information
exchange…collusion 3.0?
2
3. Cement in UK, Southern Africa, and elsewhere
• Collecting and aggregating data on monthly sales volumes, by
geographic area, customer segments
• Pricing:
• Price lists are transparent; issue is with discounting
• Changing prices and ceiling to market power
• UK: Market investigation in cement, aggregates (2014) found
info exchange likely led to higher prices and ordered remedies
• South Africa cartel: meetings in Europe & SA; firm only sharing
information (not at meetings) found not to be colluding
• Cimbel (EC): info exchange on projected increases in capacity
and output found to be strengthening and supplementing
agreement
4. Effects? cement prices in UK
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2361000000: Concrete products for
Construction purposes
2351000000: Cement
2363000000: Ready-mixed Concrete
?? Inquiry: based
on margins, shares
found cement
issues from 2007,
PPI suggests 2005.
Concrete pipes
cartel timeline
based on
admissions
5. Poultry cartel cases: USA & Zambia
• Zambia 2018: four producers limiting breeding stock and
indirectly setting production quotas
• USA, civil & criminal cartel cases:
• Criminal cases have failed (although leniency and settlements)
• DoJ now bringing case against 3rd party info exchange (Agristats)
• Anonymised info on breeding stock, hatcheries, feed, broiler flocks,
slaughtering & processing, wages for workers, inventories, sales
• Using key price index, price announcements in public and market
studies
• Concentration and vertical linkages from breeding to broilers
meant could constrain production through breeder flocks
6. Multi-level cartels, hub & spoke arrangements
• Economists do not expect cartels at different levels – why
would firms at one level want others to make cartel margins?
• Hub & spoke cartels can have similar feature:
• Toys R Us: coordinating toy manufacturers (spokes) boycotted
warehouse clubs
• Replica football kits: producer coordinating retailers (spokes), when
one retailer had been discounting below RRP
• ‘Cheese initiative’ – processors and supermarkets (spokes)
• Exclusionary rationales alongside coordination
• Monitoring & information exchange
7. Cartels at each level:
• Scrap prices
• Primary steel manufactures
• Sales/trading
• Cutting and bending
• Installation
Importance of: monitoring,
ensuring barriers to entry
Multi-level cartels example: steel in SA
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9. • Justifying budget and mobilising resources: CMA
experience
• Advocacy to make the case for competition: crucial
• For calculation of cartel penalties?
• Some lessons from experience:
• Resource-intensive to do well – do selected assessments,
including commissioning independent studies
• Can generally only be done some time after cartel has ended
(time for effective competition to drive market outcomes)
• Should not be required for penalty calculations (opens door to
defendants, see Korea); instead, use to support framework for
penalties that ensure deterrence
Economic evidence demonstrating harm?
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10. Example of concrete pipes in South Africa
Khumalo, J. J. Mashiane and S. Roberts (2014) Journal of Competition Law and Economics
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Counterfactual pipes
11.
12. • Economic analysis is essential: flagging market outcomes
which appear inconsistent with competition
Inquiring into why, especially in important sectors
• Structural & behavioural are not separate, as the means of
coordination (behaviour) depends on the nature of the
industry – what coordination problems being solved?
• Cross-border cartels?
• Multinational companies (with similar arrangements in
different jurisdictions; multi-market contact)?
Some comments on economics for detection
12
13. • Likelihood of international
collusive agreements?
• Increasing evidence
• High concentration in important
sectors such as agri-food
• Easier to evade detection
• Consider East & Sern Africa
• Related companies across region
• Major transport routes
• Would cartels be national for
traded products?
• Examples: paint, steel, cement
cartels (e.g. Kenya)
International & cross-border cartels
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Countries, cities, main ports
14. 14
• Observed behaviour consistent with normal competition?
• ‘Imperfect’ cartel arrangements – market division by country
• Production and trade flows:
• Market shares at regional level
• Companies not exporting when it appears rational to do so
• Customers/traders importing from apparent high-cost sources
• Pricing patterns within and across countries
• Basing point pricing, not related to actual costs of supply
• ‘Border effects’ – when (in theory) there is free trade
• Regional exchange of information: industry associations, private
data with digitalisation
• Other reasons: Non-tariff barriers
International cartels: screening