Some pointers from Punter Southall Analytics' Managing Director, David Rankin
Mention the word ‘cartel’ and most of us connect the concept with private armies in far-flung places fighting endless drug wars. Closer to home, it describes an entirely different reality.
In short, a cartel is a co-ordinated strategy by different companies in the same sector to control supply and manipulate prices. Ultimately, this kind of market abuse leaves consumers picking up a bill they shouldn’t be paying.
That’s not to say it’s entirely without drama, though. Cartels, better known as price-fixing, are still with us and enforcement action against them is usually signalled with a dawn raid to seize evidence.
If that does sound a bit closer to an opening scene, rather than scrutiny of spreadsheets, it’s no accident. Investigating anti-competitive behaviour is a serious business.
And it’s growing. If I were to tell you that there have been cartels in everything from canned mushrooms to the supply of envelopes and the sale of European Government Bonds you may well be surprised but all of these resulted in multi-million pound (or euro) fines.
Like the mushroom business, news of this and its implications for our pocket generally stays as dark as the instructions for growing said mushrooms. Extending the metaphor, it’s not exactly a digestible story.
Nor is it an offence without victims. Distortion of the price of any goods or services means someone, somewhere is losing out.
Rigging LIBOR rates was ultimately pinned on ‘rogue traders’ but what about the implications for those institutions, businesses and pension funds who faced significant losses as a result? The consequences include enforced change going forwards. The financial pain is measured going backwards.
Calculating how much is due is essentially our role in any mis-selling episode. In billion-pound markets, what appear superficially as incrementally tiny differences can add up to very much more.
If this is new territory for you, the relevant question would be: where do I start?
If you’re a business involved in an affected market, or a lawyer retained by such clients, that question could well be: “is it worth my while getting involved?”. Translated in the boardroom, that’s typically a size question: “how much have we lost?”. Someone needs to work that out.
Calculating damages is rarely anything but long and arduous, even with the benefits of technology.
Punter Southall Analytics manage the process for you. Typically, it requires collecting large volumes of relevant data in multiple formats, which is often dispersed throughout your organisation and supplier base.
We will guide you through the relevant stages: from preliminary estimates to provisional calculations based on data you have readily available, to full quantification analysis and reporting including chosen counterfactuals and interest assumptions.
Streamlining it further to reduce costs, we also produce evidence to support your claim, from filing through to court proceedings.
From financial services and transportation to stationery and spark plugs, it seems that where there’s a market, there’s manipulation. Asking the “how much” question is a very sensible place to start.