A South African price fixing story: Estimating overcharges in the long steel cartel

Abstract

This study investigates the economic impact of the long steel cartel in South Africa by estimating price overcharges and evaluating whether the administrative penalties imposed reflected the harm caused. Using a reduced-form error correction model, overcharges are estimated through both a dummy variable and a forecasting approach. The results show an average overcharge of 1.05% for billets using the dummy method, and 7.29% and 10.82% for billets and angles, respectively, under the forecasting method, indicating significant variation across methods. The analysis reveals that fines imposed, particularly on ArcelorMittal and Cape Gate, were substantially lower than the estimated economic damage, falling short of international enforcement benchmarks. The study argues that while structural factors in the industry may explain stable overcharges over time, enforcement mechanisms remain misaligned with harm- based deterrence principles. These findings support the integration of empirical overcharge estimates into competition penalty frameworks to improve fairness, accountability, and deterrence in cartel enforcement.