… for the reason that the economy should not remain dependent on their Agreements

Albanian economic cartels are usually small, where the average cartel includes no more than three or four companies. Moreover, the illegal activities of these firms are numerous and all affect prices. These activities include price fixing, sharing their clients and market shares, manipulating procurement auctions, and sharing confidential information. These tricks are widespread in the economy as they are detected in almost all sectors. Most cartel members are key players in their industry. The cartels consist of relatively homogeneous firms[1] in terms of productivity and sales.

In this sense of the current market, where these relationships emerge daily in the last 3 months, it is necessary for the competition authority to interact with the institutions that has agreements, as well as those that do not have to convey the proper impact of public expectations: cooperating with the law fully and uncompromisingly.

From the analysis we have conducted based on market investigations reported by the Competition Authority we can see that “there is no abuse of competition law”, is the most common decision of the CA. But in our approach, we want to clarify that situations are more complex than simply comparing the definitions for protection of competition. For this purpose, the massive use of expertise outside the institution is needed, to decompose and clarify in detail how competition is protected at this time of historical inflation.

Albanian cartel members complain that they are already at a loss, but in fact the practice of their work is that they deviate from maximizing their profit, as they appropriate part of their influence on the profits of other cartel members. Inequality, the elasticities of demand of cartel members thus depend on their market shares, as well as on the market share of other cartel members. As a result, they face lower demand elasticity and over-competitive tariffs, which affect the distribution of profit margin and its level in the totality of their businesses. We estimate that the impact of these cartels on the overall productivity of the market, where they are linked, has started from an environment where there is already a significant distribution of profit margin not only within a given industry, e.g. trading in sunflower oil.

Based on the past experience of the same markets, we can show that the cartel members transfer of profit through costs and profit between the cartels of different industries, which are not related by the nature of the activity, but by the influence of the impact on the economy of its shareholders. it would probably be higher if there were no cards. But because cartel members are the best firms in their industry, their breakdown reduces the profit margin and distributes it to other industries influenced by them, but on the other hand such a market movement increases overall productivity, as it increases competitiveness.

In the conditions, when the Albanian government has been applying for several months some joint groups (Boards) for the establishment of profit margins, which base their work methodology on relative prices, this suggests that the Government Boards are in line with the marginal relative costs.

In case the government would not rely on cooperation with cartels to “freeze profit rates” and publish the selling prices of food and industrial products, including fuels, then it would bring the Albanian economy closer to efficient distribution. The argument for this evidence comes from the fact that relying on cartels to make “their prices transparent”, when in fact they do not represent the retail market, but are dictated to it can be an ineffective way to improve the efficiency of distribution products that the Boards advertise that they are managing in the public interest and not burdening the costs of the economy.

Reducing the level of profit margins should lead to a decline in profit margins in industries where cardholders have their influence. But if the cartels had not been involved in the processes of joint groups with the government running a share of more than 1/3 of the economy in 2022, this approach would otherwise have led to a welfare benefit equal to consumption of about 0.5% of GDP. This calculation is based on the effects of the price increase on the decisions of the Boards, which have affected the contraction of turnover, through freezing prices giving a direct effect on consumption in 10-11 other regions of the country, except the Municipality of Tirana and surrounding municipalities with it.

Breaking the deal with the cartels and treating them not as part of resolving the crisis, but as the part that has to pay more for what it earns the most, as is happening in many countries in Europe and the world, would also increase competition, through a second, more direct and comprehensive channel.

Indeed, the presence of government deals with very few businesses does not allow other businesses to increase their margins and prices to a level that equates demand with supply in their area of ​​business channel distribution. The prices set by the Board influenced by the market data of the cartel members serve as an umbrella, which leaves no room for them to interact.

This limiting effect brings on diluting total profits to productivity and well-being, although the effect is probably not to the same extent as that of companies and card members distribution channels.

At this time, it is seen that “in accordance” with the implementation of the competition policy for intensive price margins (they decrease and rise little by little and not according to the market) cartel members respond to a more vigilant antitrust review by the Competition Authority by reducing even secret deals at the expense of the market and the consumer, and being so for our eyes like “good guys”.

But this reduction in the intensity of collusion (where even the Competition Authority confirms it de facto by not finding the rules violated by them) still generates gains in total productivity that are about 1% of GDP. Already with the restriction of the freedom to operate in the market, almost all the productivity of the cards is the main part that affects the Albanian GDP.

In terms of policy, we suggest that if antitrust and free competition laws were enforced that also aim at breaking secret cartel agreements could bring significant benefits in favor of competitiveness and economic development with a higher pace.

Moreover, keeping these cartels close to and in line with the policy development that the government seeks to develop (policies other than those prescribed by law) may not be intended to boost economic growth, such as industrial policies or liberalization trade reforms , as the development of the free market has rules related to its opposite that cartels do. Strengthening to the extent that we are already sanctioning with Boards their activity on other businesses has done more harm to the country’s economy than the very growth rates of 2-3% of GDP. On the other hand, this kind of closure of the economy within some cartel members has reduced its competitiveness in every potential industry for competition, all the more so in that of the extraction and renewable energy industry (which includes not only electricity).

Although our estimates may be substantial but contradictory, they seek to express with suspicion the true impact of distortions on competition on the overall productivity of the economy.

First, cartels can already set up or reinforce barriers to market entry, thus preventing manufacturing firms from entering an industry, or allowing low-productivity firms to enter the industry. They can also reduce the incentive to invest in research and development and innovate, as long as they have strong and open government support. Such dynamic support is likely to hurt productivity.

Second, distortions of competition may be the product of other forces such as large business lobbying or political affiliations influencing important decisions that have affected the level of productivity of the Albanian economy today.

Third, the impact of big business on small business, where the government has disoriented and used the latter for politics (even with fiscal populism) is very large, because the incentives of small businesses to compete with their rivals diminish as being politically unrelated pushes them to innovate less, seeing the impact on competition distortions more widely interpreted as impacts on the overall productivity and well-being of citizens. This fact is also evident from the decrease of dynamism in the Albanian economy, where the life expectancy of businesses is low compared to the countries of the region and European ones.

But we must not forget that the very life of the Albanian cartels has not lasted more than 1-2 terms of government, as the members of the cartels must change their approach, so that the economy does not remain dependent on their Agreements.

[1] all companies in an industry environment are identical