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Guidelines: Competition Advocacy-Estimating Cartel Damages

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"Taking as a starting point that the levels of detection of cartels are low and that there is under-enforcement (either because the fines do not take into consideration the levels of detection, or because they disregard the gains obtained by the violators), these guidelines seek to encourage private enforcement, or, in other words, private actions to collect damages.

There are two main reasons for this choice. First, by creating incentives for individuals to redress damages, the ability to detect offenses to competition increases whereas incentives for cartelization decrease. With high detection levels, the expected fine (which takes into account the levels of detection) also decreases and gets closer to the value of the actual gains obtained. Second, by adding up the amounts of fines imposed by the competent bodies to the amounts of compensation for damages suffered by individuals, the (low) amount actually paid by the violator (in public enforcement) will at least converge to the amount of the benefit received by the violator and, thus, the opportunity costs for participation in cartels will be raised.

The guidelines are structured as follows. In the first chapter, we present a brief introduction to basic economic concepts. In chapter two, we focus on the problem of detecting cartels. In chapter three, we present a review of methods and models useful to the quantification of overcharges. The fourth chapter focus on the problem of quantifying the passing on of overcharges. The Portuguese version of the guidelines includes an attachment that introduces statistical and mathematical basic concepts and reviews some of the most recent developments of the literature."