Cartel Damages Claims, Passing-On, and Passing-Back

Luke Garrod; Tien Der Han; James Harvey; Matthew Olczak

doi:10.1007/s11151-024-09991-9

Cartel Damages Claims, Passing-On, and Passing-Back

Luke Garrod^*, Tien Der Han, James Harvey, Matthew Olczak

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

Firms can mitigate the harm of an input cartel by passing on some of the higher cost to their customers by raising their own prices. Recent damages claims have highlighted that firms may also respond by reducing the prices that are paid to their suppliers of complementary inputs; the firm thereby passes back some harm upstream. To provide guidance for practitioners as to how such effects together affect the division of the harm, we derive the equilibrium ‘passing-on’ and ‘passing-back’ effects in a successive oligopolies model where one of two inputs is cartelised. We show that the passing-back effect is larger when there is greater market power in the complementary input sector. This reduces the passing-on effect. The complementary input suppliers can incur substantial harm, and the harm that is inflicted on the cartel’s direct and/or indirect purchasers can thereby be reduced.

Original language	English
Number of pages	32
Journal	Review of industrial organization
Early online date	12 Sept 2024
DOIs	https://doi.org/10.1007/s11151-024-09991-9
Publication status	E-pub ahead of print - 12 Sept 2024

Bibliographical note

Copyright © The Author(s) 2024. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit https://creativecommons.org/licenses/by/4.0/.

Keywords

Cartel overcharge
Cost pass-through
Damages
Vertically related markets

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10.1007/s11151-024-09991-9Licence: CC BY 4.0

Cartel Damages Claims_Garrod
Copyright © The Author(s) 2024. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit https://creativecommons.org/licenses/by/4.0/.
Final published version, 1.98 MBLicence: CC BY 4.0

Cite this

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title = "Cartel Damages Claims, Passing-On, and Passing-Back",

abstract = "Firms can mitigate the harm of an input cartel by passing on some of the higher cost to their customers by raising their own prices. Recent damages claims have highlighted that firms may also respond by reducing the prices that are paid to their suppliers of complementary inputs; the firm thereby passes back some harm upstream. To provide guidance for practitioners as to how such effects together affect the division of the harm, we derive the equilibrium {\textquoteleft}passing-on{\textquoteright} and {\textquoteleft}passing-back{\textquoteright} effects in a successive oligopolies model where one of two inputs is cartelised. We show that the passing-back effect is larger when there is greater market power in the complementary input sector. This reduces the passing-on effect. The complementary input suppliers can incur substantial harm, and the harm that is inflicted on the cartel{\textquoteright}s direct and/or indirect purchasers can thereby be reduced.",

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N2 - Firms can mitigate the harm of an input cartel by passing on some of the higher cost to their customers by raising their own prices. Recent damages claims have highlighted that firms may also respond by reducing the prices that are paid to their suppliers of complementary inputs; the firm thereby passes back some harm upstream. To provide guidance for practitioners as to how such effects together affect the division of the harm, we derive the equilibrium ‘passing-on’ and ‘passing-back’ effects in a successive oligopolies model where one of two inputs is cartelised. We show that the passing-back effect is larger when there is greater market power in the complementary input sector. This reduces the passing-on effect. The complementary input suppliers can incur substantial harm, and the harm that is inflicted on the cartel’s direct and/or indirect purchasers can thereby be reduced.

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Cartel Damages Claims, Passing-On, and Passing-Back

Abstract

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Keywords

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