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Сartel Undercover: Anticompetitive Actions in the Market with Heterogeneous Producers of a Homogeneous Product

Andrey E. Shastitko () and Sergei I. Fedorov ()
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Andrey E. Shastitko: Russian Presidential Academy of National Economy and Public Administration; Lomonosov Moscow State University
Sergei I. Fedorov: Russian Presidential Academy of National Economy and Public Administration; Lomonosov Moscow State University

Journal of Modern Competition, 2025, vol. 19, issue 2, 5-27

Abstract: The article is devoted to the situation of a cartel agreement between market participants, disguised by the goals of industrial policy and supported by foreign trade restrictions. The relevance of the study lies in the fact that the functioning of such cartels can have a significant negative impact on consumer welfare for relatively long period of time, while being protected by economic regulators. We consider this situation using the example of the European unwrought aluminum market, where national producers benefit from the price overcharge incurred because of import customs duties. Based on the analysis of trade statistics, economic and mathematical modeling, the mechanisms of cartel price overcharges in such situations are shown. It is noted that the heterogeneity of producers in terms of foreign trade regulation regimes makes it possible to obtain a cartel overcharge to the price in the domestic market even in conditions of product uniformity and competitive pricing conditions ensured by the functioning of the commodity exchange. In this case, the regulator acts as a facilitator of the cartel agreement, leveling the heterogeneity of producers in terms of costs by selectively applying import customs duties and de facto acting as a controller for maintaining monopolistically high prices. The cartel agreement itself is presented in the form of the industry association position, which supports the maintenance of import customs duties in conditions of the domestic market shortage and restrictions on the capacity of national producers. At the same time, consumers of raw aluminum who are members of the association, being the main victims of the import customs duties persistence, apparently cannot influence the position of the association due to the specifics of internal coordination and decision-making processes. To test this hypothesis, additional data will be required, as well as information about the internal structure of the association.

Keywords: European aluminum market; cartel; economic competition; industry association; foreign trade restrictions (search for similar items in EconPapers)
Date: 2025
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DOI: 10.37791/2687-0657-2025-19-2-5-27

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