International Price-Fixing Cartels and Developing Countries: A Discussion of Effects and Policy Remedies

The U.S. Department of Justice, the European Commission, and the Organization for Economic Cooperation and Development have all recently voiced concern about international price- fixing cartels. The U.S. and European Union have increased prosecution of international cartels in the past decade, but very few developing countries have made similar enforcement efforts. If these cartels have significant effects on developing country consumers and producers, the lack of antitrust prosecutions by developing countries against these cartels is an important problem. Geographically limited prosecut ions may not provide sufficient disincentives to deter collusion that has worldwide benefits for colluding firms. Ongoing prosecutions of international cartels by industrialized countries may open up markets for entry by developing country producers, but these efforts may be undermined if cartels create durable barriers to entry. Western governments are also susceptible to manipulation by domestic producers using tariff barriers and anti- dumping duties to protect the home market, both during and after the price- fixing conspiracy. Thus, developing countries may need to develop their own antitrust laws and enforcement capabilities to help deter international cartel activity. A recent ruling of the Second Circuit Court of Appeals also opens up the possibility that developing country consumers may be able to exact remedies in U.S. courts. In this paper we examine the possible effects of private international cartels on developing countries by looking in detail at three recent cartel cases, as well as at a broader cross- section of forty- two recently prosecuted international cartels. We discuss the indirect effects on developing country producers, either as competitors or co- conspirators, as well the direct effects of cartels on developing country consumers. By combining trade data with a sample of US and European prosecutions of international cartels in the 1990s, we are able to make a first attempt at quantifying the order of magnitude of the consequences of these cartels on developing countries as consumers. In 1997, the latest year for which we have trade data, developing countries imported $54.7 billion of goods from a sub - sample of 19 industries that had seen a price- fixing conspiracy during the 1990s. These imports represented 5.2% of total imports and 1.2% of GDP in developing countries.http://deepblue.lib.umich.edu/bitstream/2027.42/39923/2/wp538.pd

The Economic Impact of the U.S. Export Trading Company Act

This paper provides an empirical analysis of the limited immunity for "export cartels" offered by the United States' Export Trading Company Act (1982). We have assembled a data set of 195 Export Trade Certificates of Review - all those created from when the first certificate was granted in 1983 through the end of 2004. We provide descriptive statistics on these ETCs, including the types of firms that apply for these certificates and the nature of the restrictions placed upon them by the Department of Commerce and the Department of Justice. We then estimate the determinants of the real value of U.S. product-level manufacturing exports from 1978 through 2004. We find that, controlling for the growth rate of exports in the industry, on average ETCs do not increase exports. In some estimates, the real value of exports actually falls after receiving an ETC. There are two possible explanations for this. One is that firms choose to obtain an ETC "Certificate of Review" when they are concerned that exports in the sector are going to fall. Receiving an ETC thus precedes this fall in exports, but does not cause it. The second possible explanation is that industries with ETCs can in fact exercise market power and the decline in the real value of exports reflects a strategic reduction in the quantity of goods exported. Given the predominance of ETCs in relatively unconcentrated industries we believe the former explanation is more plausible.http://deepblue.lib.umich.edu/bitstream/2027.42/41225/1/1036-Levenstein-Suslow.pd

Commitment and monopoly pricing in durable goods models

This article investigates the issue of commitment by a durable goods monopolist. Two models of the interaction between durability, recycling, and market power are compared. The two differ according to the ability of the seller to credibly commit to a given sales strategy. This article takes the standard durable goods monopoly model, extends it to allow for depreciation, and compares the monopoly markup with Swan's predicted markup for a recycled good. The difference between the two models is shown to reduce to a single parameter in the markup equation.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/25958/1/0000024.pd

The Effect of Competition on Trade Patterns: Evidence from the Collapse of International Cartels

How do changes in competitive intensity affect trade patterns? Models of collusive arrangements in spatially separated markets generate testable predictions of the effects of collusion on price, trade patterns and concentration. We exploit a quasi-natural experiment associated with increased anti-trust enforcement activity over the last two decades to test these predictions. In particular, we analyze detailed trade data linked to descriptive information from seven international cartels which collapsed as a consequence of increased antitrust enforcement activity. Because antitrust activity is highly unlikely to affect spatial patterns of demand and supply (other than through its effect on the competitive environment), enforcement induced changes that are ideally suited to study the effect of competition on trade patterns. We confirm significant declines in prices following the breakup of these seven cartels. Contrary to conventional wisdom, and consistent with the more recent market-sharing oligopoly trade models, we find no significant change in spatial patterns of trade following cartel breakup; in particular, there is no significant change in the effect of distance on trade. Neither do we find evidence of significant changes in concentration or rearrangement of market shares. These results imply that cross-hauling is not uncommon under collusion, and hence that the existence of cross-hauling by itself does not provide evidence of the existence of effective competition.http://deepblue.lib.umich.edu/bitstream/2027.42/83158/1/ipc-114-Levenstein-Sivadasan-Suslow-The-Effect-of-Competition-on-Trade-Patterns-Evidence-from-the-Collapse-of-International-Cartels.pd

Are there better ways to spell relief? : a hedonic pricing analysis of ulcer drugs

http://deepblue.lib.umich.edu/bitstream/2027.42/36173/2/b1650609.0001.001.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/36173/1/b1650609.0001.001.tx

Estimating monopoly behavior with competitive recycling : an application to Alcoa

http://deepblue.lib.umich.edu/bitstream/2027.42/36175/2/b1408562.0001.001.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/36175/1/b1408562.0001.001.tx

Durable goods monopoly under private information

http://deepblue.lib.umich.edu/bitstream/2027.42/36174/1/b1408951.0001.001.txthttp://deepblue.lib.umich.edu/bitstream/2027.42/36174/2/b1408951.0001.001.pd