Svetlana Avdasheva, Andrey Shastitko, Aug 30, 2011
Collusion of market participants is one of the most dangerous forms of restriction of competition, adversely affecting incentives and, as a consequence, allocation and production efficiencies. According to some estimates, the average price rise under price-fixing is 10 percent ; several studies give even higher estimates. For example, according to Connor & Bolotova, the median cartel overcharge over the competitive price is 25 percent, and for an international cartel-32 percent. A similar premium set by a cartel operating on the domestic market is 18 percent. In their heyday cartels set bonuses twice the median value. Authors of a study covering about 395 cases of cartelization in the period from the 18th to the early 21st century, report an average price bonus of 19 percent, and a median of 16 percent.
It is no accident that a price-fixing agreement qualifies as one of the most serious violations of antitrust laws and is prohibited per se. One of the important prerequisites for a price-fixing agreement is trust among the parties; that is why trust-busting is not a bad thing in this case. Leniency programs are a way to destroy and prevent cartel agreements through the trust-busting among their participants-existing or potential. Similar programs exist in many countries.
The Russian practice of introducing a leniency program is of interest because it reflects experiences of other countries as well as the mistake