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216,91 million euros: that is the total amount of the fines Akzo Nobel, Arkema (formerly Atofina) and Hoechst will have to pay, following their recent condemnation for illegal cartel arrangements on the market for m onochloroacetic acid. The new European Commission goes right into commissioner Monti’s footsteps, well known for his antitrust policies.
Neelie Kroes, his successor, made it clear when she gave her comments on the condemnation: « the fight against cartels will be one of my top priorities and companies that engage in cartels will be fined heavily. » According to her, consumer interests are impaired by these « monopolistic » practises, but this thesis is not as true as people generally tend to believe.
First of all, it needs to be said that according to the official writings on market sharing and mergers, available on the Commission’s Internet website, the former look more suspect than the latter. It says a lot about the rickety European antitrust doctrine.
Indeed, a merger is simply a permanent cartel, a sealed agreement. In both cases, firms that were formerly independent will have to work together. The firms’ assets are regrouped and the decisions concerning their use centralised.
The Commission would be adopting a more coherent position if it had the same reservations about market sharing as it has about mergers, if only because market sharing may lead toward mergers. If a merger can be beneficial to consumers in some instances, as the Commission admits, there is no justification for not applying the rule to market sharing as well.
Apparently, the Commission considers mergers as harmful when they create « dominant positions ». If a merger may be beneficial to consumers thanks to lower production costs per unit, it may be harmful when it is only a « restrictive » agreement, whose only raison d'être is to obtain an increased revenue thanks to a lower production and a corresponding price increase.
If the Commission condemns market sharing, it is probably because it believes that they necessarily imply the same « restrictions » as the second type of mergers. However, this distinction between restrictive and competitive behaviour is fallacious in a free market context.
The allocation of resources to this or that production process is the outcome of competing investors trying to obtain their services. In other words, the extent of the production in a given sector is always « limited » by the existence of other sectors. The lower production in one sector will lead to an increased production in another.
How can the Commission say that consumers in general will be losing out as a result of such a modification, whether there is a cartel or not? Two possibilities spring to our minds. Either this modification corresponds to a better allocation of factors from the consumer point of view, or it is a relatively inadequate allocation. In any case, observing a « restriction » in one sector does not allow one to determine it.
In the first case, if market sharing allows the production to fall where it is required, no reproach can be made. In the second one, if a cartel operates in the limited sector, one must understand that the profits are a consequence of the errors made by other investors. If entrepreneurs are to be blamed, it has to be those who made losses because they invested elsewhere.
The fundamental point is that on the free market consumers are not the victims of cooperation between producers, but rather because entrepreneurs are not omniscient. In hindsight, the Commission may regret that the consumers did not enjoy a better service, but it cannot claim to know in advance what the best possible allocation of factors is. Provided the entrance is free, entrepreneurial decisions setting the size and the number of firms are as satisfying as they can be for consumers, because their success or failure are determined by their verdict.
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