Estimating Damages from Price-Fixing - The Value of Transaction Data

According to the European Court of Justice, any citizen or business who suffered harm as a result of a breach of the antitrust rules of the European Union (EU) should be able to obtain compensation from the party who caused the harm. Despite this clear and undisputed right of compensation, the current state of antitrust damage actions in the EU has frequently been classified as ‘ineffective’ regularly leaving the victims of antitrust infringements without any compensation for the harm suffered (see European Commission, 2011).

Since 2004, the European Commission (EC) has taken a number of steps to develop a legal framework that allows victims of EU antitrust infringements to obtain compensation. In its Green Paper on damages actions for breach of antitrust rules, the EC (2005) concluded that the robust quantification of the caused damage is one of the key barriers to a further promotion of antitrust damage actions. Consequently, in the subsequent White Paper – published in 2008 – the EC announced the plan to derive a coherent economic framework which provides pragmatic, non-binding guidance on the quantification of harm. A first draft of this Guidance Paper was published in June 2011.

Although the public and academic discourse on the various methods and models to estimate damages certainly is a necessary step in the process of strengthening antitrust damages actions, the challenges of applying them in actual cases with real-world data are often ignored. Against this background, 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.

Hüschelrath, Kai, Kathrin Müller and Tobias Veith (2012), Estimating Damages from Price-Fixing - The Value of Transaction Data, ZEW Discussion Paper No. 12-036, Mannheim.