Industrial Thread

In: Business and Management

Submitted By ekir
Words 2320
Pages 10
An Economic Analysis of Cartels in the Industrial Thread Market

Table of contents

1. Introduction

2. The market of industrial thread

2.1. Market structure of industrial thread and its products

2.2. Presentation of the operating cartels 3. Illustration of the EC’s judgment using economic theories

3.1. Economic effects of the industrial thread cartels

3.2. Description of collusions strategy in the market by abusing market power

3.3. Legal aspect of an industrial thread collusion case

4. Conclusion

5. References

8

1

1. Introduction

In a competitive market firms experience a constant pressure to offer the best goods and services to customers. Competition is an important instrument to gain economic efficiency and to maximize the welfare of producers and consumers (Perloff, 2009). Consumer welfare is a public interest and refers to individual benefits derived from the consumption of goods and services (Lowe, 2006). Therefore, the European Commission (EC) monitors the European Economic Area (EEA) to ensure compliance with the competition policy of the European Union (EU). Despite the EC’s desire to anticipate infringements some obstacles such as mergers, cartels and state aids still remain. The EC imposes high fines on firms that try to minimize competition in an illegal way. In September 2005 they “[…] fined thread producers from Germany, Belgium, The Netherlands, France, Switzerland and the United Kingdom a total of €43.497 million for operating cartels […]” (European Commission, 2005a). This paper investigates and analyzes the underlying economic principles of the EC’s action towards the market´s cartel of industrial thread.

The first section describes the market structure and products of industrial thread and the firms which were involved in the case. The second section outlines the economic effects and the legal aspect of…...

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