Cartel Damages: On the Commission’s Call for
“Simplified Rules on Estimating the Loss”
Maarten Pieter Schinkel
University of Amsterdam and ACLE
CCP 5th Annual Conference
Cartels and Tacit Collusion
Norwich, 18-19 June 2009
Damages tend to percolate through the chain of production
U.S. Antitrust Damages Practice
•Clayton Act (1914), Section 4:
“Any person who shall be injured in his business or property by reason of
anything forbidden in the antitrust laws […] shall recover threefold the damages
by him sustained.
•Mandeville Island Farms (1948): wide interpretation of “Any person”
•American Crystal Sugar (1952): overcharge as measure of harm
•Hanover Shoe (1968): passing-on defense denied
•Illinois Brick (1977): standing restricted to direct purchaser
•Contractors v. Carpenters (1983): upstream excluded from “zone of harm”
The Overcharge as Measure of Harm
Antitrust Damages Claims are Coming to Europe
•Encouraged by the European Commission
•Full legal standing – Courage (2001), Manfredi (2006)
•Passing-on defense allowed
•No punitive damages – but pre-trial interest
•No opt-out class actions – some opt-in initiatives (CDC)
•No/limited possibilities for contingency fees
•Hardly a (visible) practice yet – but some seminal initiatives
White Paper (April 2008)
Draft Directive (informally circulated April 2009)
Some Recent Contributions to the Debate
•Kosicki and Cahill (2006) – survey pass-on in US context
•Hellwig (2006) – monopoly pass-on equals DWL
•Verboven and van Dijk (2007) – discounts for marginal price increases
•Basso and Ross (2007) – discounts for discrete price increases
•Boone and Mueller (2008) – consumer harm share
•Basic three layer model
•Upstream cartel
A Model of Total Chain Antitrust Damages
Decomposition of Harm, 1/2
Downstream Effects
Decomposition of Harm, 2/2
Upstream and Consumer Effects
Upstream Damages: An Undercharge
Direct Purchaser Overcharge as Denominator
Model Specifications
Conclusions
•The direct purchaser overcharge equals the sum of all downstream pass-ons
•Yet, it misses all output effects and consumer DWL
•The direct purchaser DWL is not a good proxy of total chain DWLs
•The overcharge method is more off, the closer the cartel is to end consumers
•Upstream damages can be relatively large
•Why restrict sophisticated econometrics to but-for only?
•‘Collect first, redistribute later’ only works for direct purchaser overcharge
•Little hope for “simplified rules on estimating the loss” (EC, 2008)
•100% pass-on presumption further complicates approximate quantification
•Upstream cartel effects should be properly viewed as antitrust damages