THE ECONOMICS OF CALCULATING DAMAGES IN CARTEL CASES

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THE ECONOMICS OF CALCULATING DAMAGES IN CARTEL CASES Kasturi Moodaliyar Senior Lecturer of Competition

THE ECONOMICS OF CALCULATING DAMAGES IN CARTEL CASES Kasturi Moodaliyar Senior Lecturer of Competition Law University of Witwatersrand, Johannesburg, South Africa 1

THE COMPETITION INSTITUTIONS I N S T I T U T I O N

THE COMPETITION INSTITUTIONS I N S T I T U T I O N S Appeal of Tribunal decisions Appeal of exemption, intermediate Appeal Court Appeal of Tribunal Decisions Tribunal Merger or non-referral decisions Referral of complaints and large mergers Exemption applications, Commission Complaints & merger notifications 2

CORPORATE LENIENCY APPLICATIONS BY SECTOR 2009/2010 3

CORPORATE LENIENCY APPLICATIONS BY SECTOR 2009/2010 3

CARTEL CONTRAVENTIONS AND FINES 4

CARTEL CONTRAVENTIONS AND FINES 4

CARTEL CONTRAVENTIONS AND FINES 5

CARTEL CONTRAVENTIONS AND FINES 5

CARTEL CONTRAVENTIONS AND FINES 6

CARTEL CONTRAVENTIONS AND FINES 6

NEW AMENDMENT - INDIVIDUAL LIABILITY � If found guilty the individual may be fined

NEW AMENDMENT - INDIVIDUAL LIABILITY � If found guilty the individual may be fined up to � R 500 000 �or serve up to 10 years imprisonment �or both. � * The Amendment Act has not come into effect as yet.

INDIVIDUAL LIABLITY � A firm may not directly or indirectly: � Pay any fine

INDIVIDUAL LIABLITY � A firm may not directly or indirectly: � Pay any fine that may be imposed on a person convicted of an offence in terms of this section; or � Indemnify, reimburse, compensate or otherwise defray the expenses of a person incurred in defending against prosecution in terms of this section, unless the prosecution is abandoned or the person is acquitted.

CARTEL OVERCHARGE � Cartel Overcharge = Qc(Pm – Pc) � The cartel overcharge is

CARTEL OVERCHARGE � Cartel Overcharge = Qc(Pm – Pc) � The cartel overcharge is equal to the number of units actually sold by the cartel multiplied by the difference between the price actually charged by the cartel and the price that would have been charged had there been no cartel (the counterfactual price) 9

PROHIBITED PRACTICES RESTRICTIVE HORIZONTAL PRACTICES � Restrictive Horizontal Practice Prohibited Agreement prohibited : �

PROHIBITED PRACTICES RESTRICTIVE HORIZONTAL PRACTICES � Restrictive Horizontal Practice Prohibited Agreement prohibited : � (b) if it involves any of the following restrictive horizontal practices: � directly or indirectly fixing a purchase or selling price or any other trading condition; � dividing markets customers, suppliers, territories , or specific types of goods or services; or � collusive tendering 10

PARTIES HARMED AS A RESULT OF CARTEL CONDUCT � Direct purchasers (customers) which are

PARTIES HARMED AS A RESULT OF CARTEL CONDUCT � Direct purchasers (customers) which are intermediate sellers (producers, distributors, or retailers). � Indirect purchasers, which are intermediate sellers (producers, distributors or retailers). � End Consumers. � ‘Counterfactual’ Customers. � Competitors � Suppliers � Firms in Connected markets 11

METHODS OF CALCULATING DAMAGES � The “before-and-after” method � The “yardstick” approach � The

METHODS OF CALCULATING DAMAGES � The “before-and-after” method � The “yardstick” approach � The cost based approach � Econometric price prediction � Simulation 12

THANK YOU FOR YOUR TIME AND ATTENTION! � Kasturi. moodaliyar@wits. ac. za 14

THANK YOU FOR YOUR TIME AND ATTENTION! � Kasturi. moodaliyar@wits. ac. za 14