Concrete Shoes for Competition - The Effect of the German Cement Cartel on Market Price

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 damages 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. Given the fact that the final damage value basically is a function of the demanded quantities of the cartelized product and the cartel-induced increase in price, it becomes apparent that especially the robust estimation of the so-called price overcharge is crucial for a coherent and welfare-improving private enforcement of anti-cartel rules.

Against this background, we use publicly available price data from a German cement cartel to estimate the achieved price overcharge. In particular, we apply two different comparatorbased approaches – a ‘before-and-after’ approach and a ‘difference-in-differences’ approach – and especially study the impact of various assumptions on the transition period from the cartel period to the non-cartel period on the estimated price overcharge. We find that the cartel managed to implement price increases in a range from 20.3% (extended approach with instrumented cement demand) to 20.7% (basic approach) for the ‘before-and-after’ method and from 26.2% (pooled OLS) to 26.5% (random-effects) for the ‘difference-in-differences’ method. For the (extended) ‘before-and-after’ approach, we further show that various assumptions on the transition period from the cartel period to the non-cartel period have a significant impact on the estimated price overcharge.

Hüschelrath, Kai, Kathrin Müller and Tobias Veith (2012), Concrete Shoes for Competition - The Effect of the German Cement Cartel on Market Price, ZEW Discussion Paper No. 12-035, Mannheim.