Abstract
We use a unique private data set of about 340,000 invoice positions from 36 smaller and larger customers of German cement producers to study the value of such transaction data for an estimation of cartel damages. In particular, we investigate, first, how structural break analysis can be used to identify the exact end of the cartel agreement and, second, how an application of before-and-after approaches to estimate the price overcharge can benefit from such rich data sets. We conclude that transaction data allows such a detailed assessment of the cartel and its impact on direct customers that its regular application in private antitrust cases is desired as long as data collection and preparation procedures are not prohibitively expensive.
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Notes
See Case C-453/99 Courage [2001] ECR I-6297, paragraph 26; Joined Cases C-295/04 to C-298/04 Manfredi [2006] ECR I-6619, paragraph 60.
Other potentially damaged parties include indirect purchasers downstream, input suppliers upstream, non-cartel members or suppliers of complementary products (and their downstream customers).
In this paper, we abstract from the problem that cartels might temporarily break down for reasons such as dispute among the cartel members or new market entry (but get reinstated afterwards). From an economic perspective, such ‘non-cartel’ periods must be taken into account in total damage estimation.
For example, one possibility for the modeling of the price development in the transition period is to assume a linear price development by introducing an indicator variable with the value ‘1’ at the end of the cartel period and the value ‘0’ at the end of the transition period. Although indicator variables by definition have two specifications, a graduation can be implemented quite easily. A value of ‘1’ of the indicator variable basically means that the price at this particular point in time contains the full price overcharge of the cartel. If the indicator variable reaches a value of ‘0.5’ after the breakdown of the cartel, the respective price still contains half of the price overcharge of the cartel.
European Commission (1994).
See European Commission decision of Cembureau.
The public data set is continuously collected by the German Federal Statistical Office (FSO). Major German cement producers are provided with a standardized internet-based questionnaire and asked to provide overview information (including prices, quantities and qualities) on one representative CEM I sale activity close to the date of data collection (which is the 15th of a month; see generally Hüschelrath et al. 2013).
Source: Press release of the German Federal Cartel Office on 8 July 2002, ‘Searches conducted in companies in the cement sector’ available at www.bundeskartellamt.de/wEnglisch/News/Archiv/ArchivNews2002/2002_07_08.php (last accessed on 12 May 2012).
It is important to note that the decision of the Higher Regional Court refers to public enforcement only (following criminal law standards), i.e., its decisions are not binding for the ongoing private enforcement lawsuit (following civil law standards).
Please note that our empirical analysis only refers to (a large part of) the transactions of the 36 customers of cement companies that enter our data set. In sum, these quantities cover less than 10 percent of the entire German demand for cement.
We use prices in 2010 values, deflated with the (publicly available) lime index (see Hüschelrath et al. 2012, pp. 206–209 for a detailed description).
We concentrate on this type of cement for the remainder of the article. CEM I cement represents about 73 % of the entire cement demand in the data set.
With respect to the ‘demanded quantity per unloading point’ measure, the data base contains both transportation companies who deliver to different unloading points and companies who use cement as input good for the production of other goods such as paving stones or railroad ties. As a consequence, a differentiation by unloading point would underestimate the significance of transportation companies. Furthermore, no suitable approximation measures are available for the supplied quantity per unloading point. On the one hand, price should be explained by quantity. On the other hand, we can expect that—especially for transportation companies—price has an inverse impact on the ordered quantity per supplier leading to a simultaneity problem between price and quantity, i.e., a mutual influence between price and quantity on an unloading-point basis. The second alternative measure—demanded quantity per supplier—also faces serious flaws. For example, while the price might be reduced in the non-cartel period through rebates, the quantity cannot be corrected for, e.g., free-of-charge deliveries.
This section largely follows the analysis in Hüschelrath and Veith (2013).
Unfortunately, data limitations do not allow us to investigate the beginning of the cartel.
Please note that these dates mark the first period where a significant difference between 12-month-before and 12-month-after prices is found. Thus, they are the earliest possible date for a change in the data structure (but not the only date).
It is important to remark at this point that the structural break analysis conducted here solely aims at gaining first indications on the possible existence of a cartel agreement. As a consequence, the results of the structural break analysis here might diverge from the results that should be used for a robust estimation of the cartel damages in court proceedings.
As part of our empirical analysis, we applied alternative models to find out which of them fits best to the possible drivers on the supply side. In particular, we tried to isolate the impact of energy and input materials as possible key cost drivers by using alternative available measures. However, neither of the two expected impacts could actually be found, partly because of the availability of publicly available cost indices only.
According to paragraph 512 of the decision of the Polish Competition Authority, the non-leniency applicants denied having taken part in the cement cartel in Poland. They did not present evidence proving that they had ceased the cartel arrangement at any time. The leniency applicants on the other hand admitted that they had ceased cartel activities at the latest at the date of the leniency application in June 2006. As a consequence of failing to provide evidence to the contrary, the Polish Competition Authority concluded in paragraph 513 of its decision issued on 9 December 2009 that the anticompetitive practice had not yet been terminated.
It is important to note here that even small increases in the overcharge can have substantial effects on the final damage amount. As our estimates refer to the price in EUR per ton, it is easy to show that an increase of a few cents can have a substantial impact for a customer who has regularly bought large quantities of cement.
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Acknowledgments
Parts of the paper refer to a study on cartel damage estimations which was financially supported by Cartel Damage Claims (CDC), Brussels. The study is published in German (see Hüschelrath et al. 2012). We especially thank Jakob Rüggeberg (CDC) and an anonymous reviewer for valuable comments on previous versions of the paper.
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Hüschelrath, K., Müller, K. & Veith, T. Estimating damages from price-fixing: the value of transaction data. Eur J Law Econ 41, 509–535 (2016). https://doi.org/10.1007/s10657-013-9407-y
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DOI: https://doi.org/10.1007/s10657-013-9407-y