The Gradual Impact of Sanctioning Cartels on Market Competition

Abstract

This paper examines the impact of cartel enforcement actions—particularly investigations resulting in fines—on market competition, with a focus on manufacturing firms in Colombia to draw broader implications. The analysis leverages a panel dataset comprising 67,671 observations across 10,316 firms in the manufacturing sector from 2012 to 2020, sourced from the National Department of Statistics and the Competition Agency. Market competition is measured using the complement of the Lerner index, while enforcement actions are captured through an indicator variable that reflects their differential timing and sectoral coverage. Employing a difference-in-differences (DID) with multiple time periods approach, the study finds that cartel enforcement actions had a gradual, positive impact on market competition over time. These findings suggest that while cartel enforcement actions can serve as an effective deterrent against hard-core cartel behaviour, their ability to fully restore competitive market conditions is likely to be gradual and partial.