Can we apportion harm from price-fixing?

With its White Paper on damage actions for breach of the EC antitrust rules, the European Commission is pushing for national jurisdictions fully to compensate victims of competition law violations. In order for this to be practical, the harm resulting from abusive practices must be apportionable between the various affected economic agents. This is not an easy task, for an increase in the price of an upstream input is typically passed onto downstream customers by the direct purchasers. In a recent discussion paper, TILEC members Jan Boone and Wieland Müller show that in typical cases, the distribution of harm from price-fixing can be recovered from the data which are usually available to antitrust authorities. They develop a general model without making specific assumptions regarding demand, costs, or the mode of competition. Explicit formulas and regression specifications that can be used to estimate the relevant terms in practice are provided. Importantly, the authors illustrate how basic intuition from the tax incidence literature, well-known to practitioners, carries over to antitrust cases. Although much more work is needed in this difficult area, the paper goes a long way toward providing simple guidance to market participants and courts alike.