Cartel Damages to the Economy: An Assessment for Developing Countries

Book Chapter
Published on 1 June 2017

Abstract

Competition policy implementation and enforcement, including cartel deterrence and detection, require substantial investments. Therefore, it is important to understand to what extent these investments are compensated in terms of prevented damages to consumers. The answer to this question is especially important for developing countries for which the decision to create or reinforce an antitrust authority largely depends on associated costs, while a sufficient and robust quantitative evaluation of potential benefits is still missing. The present chapter aims at providing the missing evidence by assessing the aggregate economic harm caused by cartels in developing countries. The authors find that the economic damage of cartels already detected in developing countries is substantial—in terms of affected sales related to gross domestic product (GDP), the maximum rate reaches up to 6.38 percent, while excess profits resulting from unjustified price overcharges reach up to 1 percent when related to GDP. Furthermore, if one wants to take into account cartels that were not detected, the total damage appears to be at least four times larger.

Authors

Frédéric Jenny

Organisation for Economic Co-operation and Development

Aleksandra Khimich

Compass Lexecon