Breaking the Cartel of Steel

This story in the Times of London reports that the Competition Council in France conducted a three year inquiry and determined that a number of firms in the steel industry had colluded to set prices and raise barriers for entry to potential rivals. As has been monotonously stated on this blog, one of the clearest justifications for regulatory policy is in the quest to enhance industry competition. Adam sage's story reports that the Competition Council has levied a record fine of €575 million on 11 firms.

Again, while I am convinced that light regulation is important, the story suggests that there was a finding that this was an elaborate price fixing and barrier raising cartel. I applaud the Competition Council of France because price fixing and lessening of competition is without doubt harmful to competitors and to consumers of steel products. What I am less clear about is the manner in which the size of the fine is determined. It is unclear what assumptions are employed in reaching the fine and the apportionment across the colluding firms. I am also unsure that this is indeed the largest fine in real terms because the comparisons being made are all in nominal terms.

Finally, the mere evidence that the managers of the firms met is insufficient reason to assume that a cartel is in place but the other evidence involving market sharing, price fixing and other collusion in punishing members who do not adhere to the agreements demonstrates the nefarious effects of this cartel. This is one instance in which the use of the word cartel is not a smear word for a dominant set of corporations.