Assessing damages in a bid-rigging cartel with extensive information exchange
A competition authority’s infringement decision establishes the legal breach (“crossing a red light”), but it does not quantify private loss (“actual harm suffered”). When a broad set of market participants were fined for participating in a long-running bid-rigging cartel, our client wanted to know whether they likely paid too much as a result (quantum). Which purchases were affected, by how much were prices inflated, and how could all this be evidenced using robust economic analysis that would withstand scrutiny in settlement negotiations and ultimately before a court?
As it turned out, the economic crux of the case was evaluating the information exchanged during the conduct, while the practical challenge lay in the complexity of the product.
Legal presumptions vs actual harm
While bid-rigging cartels can trigger a legal presumption of harm before national courts, actual economic impact depends on the competitive landscape, product characteristics and how effectively coordination worked in practice. In any given matter, the true economic harm could be substantial, zero, or anywhere in between.
Because the product in this case was highly complex, standard off-the-shelf overcharge methods were insufficient. We worked closely with the client on detailed data collection, applied sophisticated econometric techniques, and evaluated additional qualitative and quantitative evidence to establish a robust empirical base.
Looking beyond named tenders and fined firms
The competition authority’s infringement decision listed specific tenders as affected. Fines were issued to a subset of the firms active in the market. However, the key economic question for our assessment was whether pricing distortions extended beyond those named tenders and to other procurement rounds for the same product - and to tenders won by firms that were not fined.
While follow-on claims before national courts may extend beyond the tenders explicitly identified by regulators, any broader impact must be individually assessed and supported by evidence. In this matter, testing whether effects spilled over into unlisted commerce was critical, as it fundamentally altered the relevant volume of affected commerce.
Evaluating the impact of the Information Exchange
The conduct comprised a substantive exchange of very detailed information over a long period of time between many competitors. A central question for us was how firms could have used that information alongside the established cartel structure to the detriment of our client.
We assessed the commercial relevance, frequency, and timeliness of the information to test whether it could have cast an umbrella effect over the wider procurement for this product and facilitated implicit collusion, thereby affecting prices in tenders outside those specifically listed by the authority.
Authority decisions can provide important clues on this question, but they do not provide an economic assessment of the broader implications for prices, purchases, and affected commerce. Careful analysis is needed to connect the available evidence to the likely economic effects.
Informing a comprehensive settlement
Our analysis demonstrated a wider competitive impact of the information exchange, extending considerably beyond the tenders and firms identified by the authority.
Alongside the affected volume of commerce, we provided estimates of the price effects. Both elements were relevant: the scope of the purchases likely affected and the estimated effect on the prices paid.
The resulting analysis materially informed the settlement amount and contributed to a comprehensive settlement within a short timeframe.