Wednesday, July 1, 2020
Maarten Pieter Schinkel, University of Amsterdam - Department of Economics; Tinbergen Institute and Abel d'Ailly, University of Amsterdam address Corona Crisis Cartels: Sense and Sensibility.
Western competition authorities responded quickly and unanimously to the COVID-19 pandemic with a generous exemption from cartel law for any companies that aim to solve pressing scarcities through collaborations that restrict competition. However there is little reason to expect more supply, fair distribution, or wider use of personal protective equipment faster or at all from anticompetitive horizontal agreements. Traditional crisis cartels are about reducing excess supply, not excess demand. Embracing the policy may well have been about public image, rather than high expectations of collaboration amongst rivals contributing to solving the needs associated with COVID-19. This remarkable field experiment is not without side effects. By relaxing the first article of antitrust, the agencies undermined their own authority, just when we need them to effectively control the many markets that are rapidly consolidating as a result of the lockdowns and asymmetric state aids. The agencies should have stood by competition instead. On the other hand, this case could become a rich source of learning about the effectiveness of public interest cartels.