Thursday, October 25, 2007

How to Address "Invisible" Cartels

Posted by D. Daniel Sokol

Antitrust enforcers know they are out there, ripping off consumers.  Yet, how do you prove the existence of a cartel when it seems to be invisible.  Peter A.G. van Bergeijk of the Economic Policy Directorate Ministry of Economic Affairs answers this question in the Dutch context with his article On the Allegedly Invisible Dutch Construction Sector Cartel, which appears in the latest issue of the excellent Journal of Competition Law and Economics (a must read publication).

ABSTRACT: This paper considers an extensive cartel contamination of markets in the Dutch construction sector. Overwhelming legal evidence of bid rigging in this sector was obtained in 486 leniency applications in which complete secret accounts were submitted. I offer a case study and a broadly based post mortem of methodologies that were applied earlier to detect malfunctioning markets in the Netherlands, but failed to identify the construction sector as problematic. It is concluded that these studies were seriously flawed. Theoretical and empirical economic forensics (if properly applied) creates value for antitrust authorities in detection of antitrust violations directly, or by informing them where to look for direct evidence.

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