Cartel Case Study
The following is a case study of an economic analysis of Cartel agreement from European Comission’s paper[1] of six firms in the European Economic Area (EEA) for automative bearings, the measures authorities took when they discovered the Cartel and of analyses and remedies the authorities can impose when they discover Cartel. Dominated by an oligopolistic market structure with few sellers, Cartel is a collusive agreement where the members seek to retain market share and control price structure. For the welfare of the economy Cartel can be destructive.
On January 2011 six participating firms were diagnosed in EEA area with collusive behavior of Cartel on automative bearing and in 2014, firms were fined by the EU Commision
…show more content…
In a graph below we can also observe how the profit maximazition is possible through oligopoly compared to the Market Welfare. (Assif to send the graph and discuss) + the conclusion discussions point 7
Most of the countries approved their competition policy in order to fulfill the market fair competitiveness and protect customer interest, guard against improperly gaining in the business environment Regulators aim to enhance market power/efficiency as much as possible.
Many economists and companies have refused side effect of the regulation enforcement and called it as deregulations. To address those problems, some of the authority are using the cost benefit analysis of their regulation’s effect which was become the typical method to assess. In our cases, we would like to define the cost benefit analysis of the competition policy in below. Firstly, we define the main criteria for the direct and indirect expense.
Direct cost: which can be directly connected with regulation’s effect and one cost object
Indirect cost: which cannot be accurately attributed to the regulation’s effect and linked with another cost object;
Cost benefit comparison – Government
…show more content…
(6) Good regulation could improve the quality of free market.
(7) Protection of the customer interest is the most important goal for the competition policy. The amount of the fines is paid into the Community Budget. The fines therefore help in this example to finance the European Union and reduce the tax burden on individuals.
(8) To protect the small company from the big company.
7th point. Asif.
The question of penalty payments is difficult, on one hand a lesson of consequence must be made on the other hand it can not be so great that it force companies out of business. For small pool of sellers, possible to create also potentially issues with the people buying the services because there is no guarantee in such a small market other competitors can increase their productions to supply product. There is no guarantee as of tomorrow the other would be able to increase their… to provide the product.
This then generates
• Reduced competition
• Unemployement
• Barrier to new players.
Government needs to fine them enough that teaches them a lesson but not enough that it puts them out of business. Balance should be
Some challenge that the most efficient regulator is free-market competition among those seeking to attract the buying public. They argue that government regulation is intrusive with the marketplace and works to the disadvantage of both consumers and producers. Advocates of government regulation, however, see a better need to observe and guide the path of competition. They believe that an entirely unrestrained market will unavoidably lead to monopolistic practices, higher costs, underserved segments of society, and lower-quality goods and
Contents 1. 2. 3. 4. 5. 6. 7. Facts ............................................................................................................................. 3 Antitrust Law On Monopolization And Attempting To Monopolize .......................... 7 Economics Of
This paper will discuss the Google case that was presented by Microsoft stating that Google was in violation of antitrust laws. Also, in this paper some of the pecuniary and non-pecuniary costs will be discussed. Given in this paper will also be my thoughts on monopolies and oligopolies.
Even if corporate crime is detected it can be very difficult to prosecute and when prosecuted is often only very lightly punished. Many cases of corporate crime are punished with fines of only a few million pounds which is often far less than the cost of recalling a certain product or abiding by the correct health and safety or environmental regulations.
Antitrust laws are to protect competition. The free and open competition benefits that consumers have by ensuring that they have lower prices as well as new and better products. In a freely competitive market, each competing business generally will try to attract consumers by cutting its prices and increasing the quality of its products or services in order to try to beat out there competitor. The competition and the profit gives the opportunities to bring and also stimulate businesses to find new, innovative, and more efficient methods of production. Consumers sometimes benefit from competition when there are lower prices and better products and services (). The antitrust law is the law that
Antitrust law is created to promote healthy completion, which eventually benefits the end users by ensuring the product & service prices remain low & affordable for most. It also helps build a better market, by ensuring open & free completion. In a freely existing market, every competing entity o business usually play by their rules, they would use attractions such as low price by cutting the already reduced prices or by increasing the level of their service or quality of the product .Fair practices , the profit opportunities and Competition also act as a stimulator for business. This stimulator helps business find innovative, new as well as more efficient methods of production. This also improves the overall quality.
In the year 2010 the European union fined 17 bathroom manufacturers from different European countries for having made price agreements to keep the price of their products unnaturally high. The cartel covered six countries and lasted for 12 years. The cartel was went public when Masco, one of the 17 firms, was given full immunity in return for providing information to the European commission(EC). The firms were fined 622 million euro’s, which led to multiple firms getting into financial trouble. In this paper I am going to explain how the bathroom manufacturers cartel worked and on top of that give a conclusion on if the fines were justified. I am going to do this by explaining what a cartel is and how it works, then I am going to provide information about the bathroom manufacturers cartel case. I do this by explaining how they made price agreements. At last I am going to provide a conclusion whether the firms got punished in the right way. And if the
Antitrust investigation is of considerable importance because it is utilized in the establishments of mergers, partnerships, acquisitions and other business takeovers/partnerships which when completed might result to an antitrust violation. These laws serve to prohibit services designed to restrain trade and commercial progress such as a monopoly structured market. Monopoly structured market is when there is a single provided product with no close substitutions. As opposed, to a monopoly, a pure competition market is an aspect in which multiple companies offer identical or close to the same products, which will compete with price and quality, and in some case costumer service. Additionally in contrast, oligopoly is a market structure where there are a few firms producing all or most of the market supply of a particular good or service and whose decisions about the industry's output can affect competitors. Oligopolies firms tend to charge reasonably premium prices but they compete through advertising and other promotional means. Simultaneously, possessing an array of market structures safeguard the consumption of basic products and services as supplied by the business community to the rest of the human populace. “When P = MC, society cannot gain by producing 1 more or 1 less unit of the product. In contrast, a monopolist maximizes profit by producing the lower output level at which marginal revenue (rather than price) equals marginal cost. At this MR = MC point, price exceeds marginal cost, meaning that society would obtain more benefit than it would incur cost by producing extra units” (McConnell, Brue, and Flynn, 2012, p.375). Unlike most companies, Google has cornered its market and does not have to contemplate the high barriers to entry or costs. However, these
The competition policy is about the law placing rules to assure that an organization or business do compete their business market fairly among each other’s. With this, it strengthen endeavour and proficiency, to make a more widely extensive choice for consumers and also help diminishes costs and enhance its quality. Besides, the competition policies are also known as the government policies that help avoid and make reduction of abusing of a monopoly power among market. Thus, the competitions act 1998 as the competition policies to make arrangement about the competitor and manhandle of a prevailing position among the markets. (Legislation.gov.uk, 2016)
Similarly, anti-competition issues have been the primary concern of national competition authorities, and they have been involved in antitrust restrictions on firms (Commission of the European Communities 2004). Traditionally, competition authorities have focused on how to detect anti-competitive activities of firms such as price fixing, bid rigging, and other forms of collusion. Nicklisch (2012) reported that the enforcement of antitrust legislation has been regarded as an important issue in the European Union. Likewise, the US Justice Department accused nine auto parts makers (FBI 2013). Anti-competitive attempts of firms are subject to such criminal prosecution as they can have enormous negative effect in the economy and can last for more
The EU market for goods is already highly integrated and harmonised along the 28 countries. However, to make the EU market work efficiently, businesses have to respect a number of rules and compete fairly. Anticompetitive behaviours, such as the abuse of a dominant market position, price-fixing agreements and unwarranted public support, are prohibited.
The law has been seen to protect competition for a very long time. Common law states and demands that the restraints that have been put on trade must be reasonable in order for them to enforce them.
Competition and environmental regulation are both compulsory. Both environmental regulation and competitiveness policies are two strong policies that are taken into great consideration. They both aim to prevent market failures and enhance social welfare. The purpose of this essay is to find out whether strict environmental regulation can assist industries to achieve competitiveness, followed with arguments in favor of or against. The main aim of strict environmental regulation is to correct environmental damages while the aim of competition policy is to prevent distortions due to the exploitation and misuse of market power.
This paper presents a description of market structure in which the bearing companies operate in Europe, possible environment that led to collusive behavior, incentives for companies that led them to participate in cartel and resulting welfare from it. Moreover, the paper also presents an assessment of Government intervention with costs and benefits analysis and its effects to all stakeholders. Through this assessment, an argument is carried out on the appropriateness of
The Irish courts despite presiding over 33 convictions on indictment for cartel offences are yet to develop a suitable methodology for dealing with cartels in order to punish members and deter future cartels, while at the same time taking into account the economic damage caused by cartels to consumers. Negative effects in regard to consumer welfare include higher prices, a lack of transparency, limited output from firms and a territorial approach; Cartel members can all rise prices together, which reduces the elasticity of demand for any single member. Members of this cartel can also agree to withhold information from consumers such as hidden charges. Members may agree to limit output onto the market keeping demand high and supply low. Cartel members may also agree to split regions up into territories under the agreement that they will not encroach upon the other members territory, leading to a reduction in competition.