Estimating Consumer Damages in Cartel Cases

During recent years the question of legal standing of consumer associations in the course of private cartel damage claims has increasingly attracted attention within the European Commission (EC). The European Consumer Consultative Group (ECCG), a sub division of the EC for end consumer interests, adopted an opinion on private damages actions in November 2010. The ECCG states that "innovative and practical solutions to the calculation of damages are needed to replace the often impossible task of calculating the exact loss."

Against this background, we show in this article how final consumer damages can be empirically quantified. In particular, using a consumer panel dataset with 35.000 transactions we estimate the damage suffered by German consumers due to the European detergent cartel. The cartel lasted from January 2002 until March 2005 and covered the markets of eight European countries. The three largest producers of heavy laundry detergents, who collect around two thirds of the sales and volume in the German detergent market, were involved in this cartel.

Our estimations suggest average overcharges between 6.7 and 6.9 percent and an overall consumer damage of about 13.2 million Euro over the period from July 2004 until March 2005. Under the assumptions that the cartel-induced share on turnover is representative for the entire cartel period and all affected markets, the overall consumer damage even accounts for about 315 million Euro. Our results further suggest that the retailers reacted to the price increases of the cartel firms via price increases for their own detergent products, resulting in significant umbrella effects. We quantify the damage due to this umbrella pricing to a total of 7.34 million Euro. Our findings are important for cartel damage estimations in general and for the quantification of consumer harm by consumer associations in particular.

Laitenberger, Ulrich and Florian Smuda (2013), Estimating Consumer Damages in Cartel Cases, ZEW Discussion Paper No. 13-069, Mannheim.