Deterrence effects of Korean antitrust enforcement on producer prices and profit margins

Abstract

Antitrust enforcement is well established in Korea, yet there has been little study of its effectiveness. John Connor, however, noted that "the Korean [Fair Trade Commission] has the best record of anti-cartel enforcement in Asia."1 In this article, we examine several datasets to investigate whether antitrust enforcement in Korea, especially anti-cartel activity, has had a price-limiting impact over the past couple of decades. We compare the behavior of firms and industries that have been subject to antitrust investigation to those that have not. We examine the response of the firms and industries under antitrust investigation following the cases. The results presented here are consistent across two very different data sets of indicators for the Korean economy. The results suggest that long-term deterrence is unlikely to be observed from antitrust investigations, although the impact on short-term price and profit margin may be expected. However, the stronger effects observed suggest that firms in Korea have begun to pay more attention to the actions of the Korean Fair Trade Commission (KFTC) over the past decade since the more rigorous enforcement of antitrust.