Determinants of Cartel Formation and Survival in Bulgaria during the late years of economic transition (2001-2010): the case of the food sector

Abstract

A strong upward trend in cartel investigations and discoveries in Bulgaria between 2001 and 2005, raises questions regarding the factors that have pushed firms towards collusion and helped them to sustain it. This research compares the determinants of cartel formation in Bulgaria, (obtained through the analysis of information from the available 84 decision reports provided by the Bulgarian Commission for the Protection of Competition) with empirical evidence provided by Levenstein and Syslow (2006) derived from their analysis of other cartel samples. This study finds that 40% of Bulgarian cartels in this sample were in the food sector. Most of the examined agreements are classified as successful and shared similar determinants for formation to the ones identified in the literature. Yet, the paper finds that behavioural factors, such as social and cultural cohesion, as well as the involvement of trade associations have been the most important for cartels success. Moreover, it concludes that EU membership as well as the growing importance of non-domestically owned companies in the food sector, have pushed firms towards forming defensive collusive agreements.