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Concerted Practices

Combating Cartels in Developing Countries: Implementation Challenges on the Ground

Martha Martinez Licetti, Competition Policy International, No. 12, September 2013.

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A recent literature review conducted by the World Bank provides evidence that there are significant gains from combating cartels for developing countries (Kitzmuller and Martinez Licetti, 2012). Besides increasing the cost of goods and services, cartels are associated with low labor productivity and low incentives to innovate. At the same time, tough cartel enforcement is an effective tool for reducing the adverse effects of anticompetitive behavior (Symeonidis 2008). Moreover, evidence suggests that international cartels target countries without cartel enforcement (Clarke and Evenett 2002). Evenett, Levenstein, and Suslow (2001), who analyzed a sample of 40 international cartels in the 1990s, found price drops on the order of 20 to 40 percent after cartels were broken up.

However, independently of its recognized benefits, anti-cartel enforcement continues to be a challenge in developing countries where government policies still facilitate the creation and sustainability of cartel behavior among firms. This article explores the challenges identified as part of the analytical work and technical assistance provided by the World Bank Group in the competition policy field. It also suggests a few areas to tackle in order to increase the effectiveness of anti-cartel enforcement implementation in less developed economies.

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