Cartel Damage Mitigation from Retailers' Store Brands

14 Pages Posted: 4 Feb 2022

See all articles by Roman Inderst

Roman Inderst

Goethe University Frankfurt

Marco J.W. Kotschedoff

KU Leuven

Raphael Kuhlmann

Goethe University Frankfurt

Date Written: January 2022

Abstract

As store brands (or private labels) are not only common in many product categories but are often procured competitively from different sources or even through vertical integration, they may be not or much less directly affected by a cartel induced overcharge. The first part of this article provides the economic foundations for how we should expect retailers to optimally adjust their store brand prices when facing higher wholesale prices on national brands. While retailers should pass on at least some of the overcharge for national brands, resulting in a price increase for national brands, theoretically their optimal response with respect to store brands is ambiguous, as there are two potentially opposing effect, a "demand diversion effect" and a "margin effect". Consumers could thus face either lower or higher store brand prices when there is a cartel of brand manufacturers. In any case, however, the optimal reaction of retailers allows them to mitigate the immediate damage inflicted by the overcharge on national brands, which raises the question to what extent such mitigation should be accounted for in follow-on cases. In the second part of the paper we illustrate our arguments with an empirical analysis of the German coffee cartel.

Keywords: Cartel damages, damage mitigation, Store brands, umbrella claims

JEL Classification: D43, K21, K42

Suggested Citation

Inderst, Roman and Kotschedoff, Marco J.W. and Kuhlmann, Raphael, Cartel Damage Mitigation from Retailers' Store Brands (January 2022). CEPR Discussion Paper No. DP16950, Available at SSRN: https://ssrn.com/abstract=4026856

Roman Inderst (Contact Author)

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60629
Germany
+49 (69) 798-34601 (Phone)
+49 (69) 798-35000 (Fax)

HOME PAGE: http://www.wiwi.uni-frankfurt.de/en/departments/finance/lehrstuhl/prof-dr-roman-inderst/team

Marco J.W. Kotschedoff

KU Leuven ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Raphael Kuhlmann

Goethe University Frankfurt ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

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