What Impact Does Antitrust Intervention Have on Competition? The Case of Public Drug Procurement in Russia

Abstract

In this paper we study antitrust intervention in long-term relationships between public procurer and his preferred supplier in one of the Russian regions. We presume that antitrust control of auctions held by affiliated procurer increases the risks of implementing long-term relationships with his preferred supplier. However we found out that after the intervention of antitrust agency the number of bidders in the auctions increased, but relative contract prices remained the same.

We argue that procurer and preferred bidder invited firm with passive bidding strategy to decrease the risks of antitrust punishment. Thereby, antitrust intervention led to fake competition, but not to honest non-corrupt behavior in public auctions.

Keywords: public auctions, antitrust policy, pharmaceuticals, Russia

JEL Classification: H57, L40