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Price-fixing Overcharges: Focus on Europe by John M. Connor ENCORE Annual Conference Amsterdam, April 14, 2005 Discussio

Price-fixing Overcharges: Focus on Europe by John M. Connor ENCORE Annual Conference Amsterdam, April 14, 2005 Discussion by Maarten Pieter Schinkel University of Amsterdam and ACLE . Key Findings. The average overcharge is very high: Mean is about 50% (including zero’s)

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Price-fixing Overcharges: Focus on Europe by John M. Connor ENCORE Annual Conference Amsterdam, April 14, 2005 Discussio

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  1. Price-fixing Overcharges: Focus on Europe by John M. Connor ENCORE Annual Conference Amsterdam, April 14, 2005 Discussion by Maarten Pieter Schinkel University of Amsterdam and ACLE

  2. Key Findings • The average overcharge is very high: • Mean is about 50% (including zero’s) • Medians between 20-40% (US < global < EU) • Slight downward trends – reflecting enforcement effects: • US, DOJ: end of 80’s (Ghosal, 2005) • EU, DG COMP: end of 90’s (Schinkel et al., 2004) • Present remedies are impotent (30-35% lower limit) • All types of collusion hurt about the same • Estimation methods do not significantly differ in quality

  3. Some Observations: Methodology • What classifies as a cartel? • Quality of the sources very heterogeneous • Limited private damages litigation (more precise) • “Found-out-fools-dilemma”: • Underestimate: tip of the iceberg • Overestimate: smarter ones set lower overcharges

  4. Some Observations: Analysis • Monopoly overcharge – linear case: • Enforcement effects (detection rather than sanctions) • No discrimination between estimation methods • International cartels and outside competition • WTO/UN competition law enforcement

  5. Relevance for Fining Guidelines • Ancient, not-guilty, zero overcharge and export cartels • Possible to fine too harshly (not Becker) • Sales-based fine may give perverse incentives • Deadweight losses and spread hurt • Posnerian fine (Coase-like) • Proper damages estimates

  6. Concluding Remarks • Impressive body of work – important • Need to rethink sentencing guidelines worldwide • Remedies need to be carefully tailored • We should be careful with aggregates • There may be more effective sanctions (CEO targeted)

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