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Estimating the Benefits of Anti-cartel Interventions: The Case of the South African Cement Cartel

  • Hariprasad GovindaEmail author
  • Junior Khumalo
  • Siphamandla Mkhwanazi
Chapter
Part of the International Law and Economics book series (ILEC)

Abstract

Several cross-country studies reveal that there are significant gains from competition law enforcement for both developed and developing countries and the results are robust especially from combating cartels. In this article, we estimate the direct financial benefits to consumers, by deriving estimates of the impact of the Competition Commission’s (Commission’s) intervention following the uncovering of the South African cement cartel. To do this, we estimate the avoided price (overcharge) as a result of the uncovering of the cartel and the avoided duration in years (the avoided duration is the estimated expected future duration of a cartel, using case specific information). Econometric estimation having accounted for cost and demand shifters shows that overcharges were between 7.5 and 9.7 % during the cartel period compared to post-intervention period. Hence calculated total savings to the South African consumers due to Commission’s intervention between 2010 and 2013 calendar year are approximately in the range of R4.5 to R5.8 Billion (US$424.5–US$547.1 Million). Moreover, had the Commission been successful in its first intervention of 2000 dawn raids, the total savings to the South African consumers would have been approximately in the range of R14.9–R19.3 Billion (US$1.4–US$1.8 Billion) between 2000 and 2013. Apart from these financial benefits, we find that the market has generally become more competitive, as evidenced by firms penetrating into regions (provinces) that they were previously not active in.

Keywords

Cartel Overcharge Market Allocation Information exchange 2SLS 

JEL

L40 L41 

Notes

Disclaimer

The views expressed herein are of the authors’ and not purported to reflect those of the Competition Commission, South Africa.

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Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  • Hariprasad Govinda
    • 1
    Email author
  • Junior Khumalo
    • 2
  • Siphamandla Mkhwanazi
    • 3
    • 4
  1. 1.Policy & ResearchCompetition Commission, SASunnyside, PretoriaSouth Africa
  2. 2.Policy, Research and Analysis, Independent Communications Authority of South AfricaSandtonSouth Africa
  3. 3.Competition CommissionPretoriaSouth Africa
  4. 4.Standardbank CIBJohannesburgSouth Africa

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