- Balancing the Public Interest-Defence in Cartel Offenses
- Number of pages
- Amsterdam: Department of Economics and ACLE, Universiteit van Amsterdam
- Amsterdam Law School Legal Studies Research Paper: Amsterdam Center for Law & Economics Working Paper
- Volume | Edition (Serie)
- 2016-05 | 2016-01
- Document type
- Working paper
- Faculty of Law (FdR)
Faculty of Economics and Business (FEB)
Interfacultary Research Institutes
- Amsterdam Center for Law & Economics (ACLE)
Amsterdam School of Economics Research Institute (ASE-RI)
Horizontal agreements may be exempted from cartel law if they advance certain public interests, such as public health or the environment, enough to compensate the consumers damaged by their anti-competitive effects. We formalize the balancing of cartel unit price overcharges on a private good against the willingness of its consumers to pay for an accompanying public good. A cartel could improve upon the classic under-provision in competitive equilibrium, even though it crowds out private contributions. We show however that the required compensating public good level in no-contributor economies decreases in each consumer's willingness to pay, which is contrary to the Samuelson condition. With at least one private contributor, the policy can never attain first-best. Moreover, by self-selection the policy asks those individuals with the lowest willingness to pay for the public good to pay most, which is orthogonal to Lindahl-pricing. As a result, the public interest-cartel is typically not sustainable. To identify a genuine public interest-defense requires more information than a competition authority can reasonably be expected to have.
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