Is All Cartel Activity Evil?

Authors


  • The authors gratefully acknowledge the comments and suggestions provided by two anonymous referees. Any remaining errors or omissions are the sole responsibility of the authors.

Daniel Morgan, Department of Treasury and Finance, 1 Treasury Place, East Melbourne, VIC 3002, Australia. Email: daniel.morgan31@gmail.com

Abstract

The new Australian cartel laws prohibit a provision of a contract, arrangement or understanding that inter alia, results in price fixing and output restriction between competitors in the relevant market. This is subject to a recognition that sometimes such conduct can be in the public interest, in which case the Australian Competition and Consumer Commission (ACCC) may grant an authorisation. One such instance may be an activity characterised by substantial externalised cost. An authorisation application would need to provide suitable evidence in support of the underlying case being argued. Traditionally in Australia, such evidence has been qualitative in nature; however, where possible, the ACCC and its counterparts in the EU and New Zealand encourage quantitative estimates. This is a case study of the welfare impact of output restrictions in the Australian beer industry, which is a source of substantial negative externalities. A standard simulation exercise is utilised as an example of how applicants and the competition regulator might combine theoretical and quantitative concepts to better achieve the objectives of the new legislation.

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