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European Journal of Law and Economics

, Volume 32, Issue 1, pp 15–33 | Cite as

Detecting illegal activities: the case of cartels

  • Korbinian von Blanckenburg
  • Alexander Geist
Article

Abstract

This paper considers enhancements of a comparatively new method to detect cartels, the System of Cartel Markers (SCM), introduced by Blanckenburg and Geist (Int Adv Econ Res 15(4):421–436, 2009). The aim of SCM is to find illegal collusion on legal markets with observable market data. It uses expected behavior patterns such as low level of capacity utilization, slackness of price adjustments to exogenous shocks, excess rates of return, nearly constant capacities, less price changes and lower variance of capacity growth rate. However, the testing of cost efficiency is lacking so far. Following Leibenstein’s (Am Econ Rev 56:392–415, 1966) X-inefficiency theory, we assume that cartel members face lower competition and hence, tend to be less cost efficient. Therefore, we enhance SCM and use cost efficiency as a further marker in order to detect cartels. We apply SCM to the German cement cartel and find empirical support for some markers. The proposed methodology may be used for antitrust screening and regulatory purposes.

Keywords

Competition policy Workability of markets Industry studies Cartel detection 

JEL Classification

L10 L60 

Notes

Acknowledgments

We are grateful to an anonymous referee, Heinz Grossekettler, Andreas Hadamitzky and Selina Reinicke for helpful comments and suggestions. Our special thanks go to Rabea, Leonore & Kiran von Blanckenburg and Nathalie Markwart-Geist & Maxim Geist.

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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.German Institute for Economic Research (DIW Berlin)BerlinGermany
  2. 2.Institute of Public EconomicsUniversity of MünsterMünsterGermany

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