The Gradual Impact of Sanctioning Cartels on Market Competition: Evidence from the Colombian Manufacturing Sector

Abstract This paper investigates how fines on hard-core cartels affect market competition in Colombia. We use data from the national department of statistics and the competition agency, which covers 10,316 firms in the manufacturing sector from 2012 to 2020 and a panel of 67,671 observations. We measure market competition by the complement of the Lerner index and an indicator variable to account for the variation in the timing and sectors of the fines. We apply a difference-in-differences (DID) approach with multiple periods based on Callaway and Sant’Anna (2021) and perform robustness tests with Gardner (2021) and by incorporating anticipation effects. Our results show that the fines had a positive and gradual impact on market competition, implying that they deterred cartel behavior but also that some tacit collusion and price inertia persisted over time. JEL codes: K21 - Antitrust Law, L41 - Horizontal Anticompetitive Practices, L60 - Industry Studies: Manufacturing, C23 - Panel Data Models; Spatio-temporal Models, D22 - Firm Behavior: Empirical Analysis