"Yogurt Cartel" of Private Label Providers in France: impact on prices and welfare

During the period 2006 to 2012, French competition authorities pressed charges against the country’s top 11 firms for engaging in a price-fixing cartel in the fresh dairy store brand segment. Using an empirical vertical bargaining model, this paper studies the effects of the "yogurt cartel" on the price of store brand and national brand products, on the profit sharing between dairy dessert companies and retailers, and consumer welfare. We find that data supports collusive behavior in the dairy dessert market. The cartel leads to price effects for store brands varying from 7.3% for other dairy desserts to 11.3% for yogurts, and those price effects would even be stronger if the cartel also affects the ability of retailers to negotiate with manufacturers. We also show that in a hypothetical situation without the collusion of private label providers, the prices of national brands would have been higher and manufacturers’ profits for the sales of their national brand products would have been lower. The cartel thus benefits manufacturers both in the national brand and private label markets. We show that the national brand dairy dessert market should be taken into account when evaluating the damages to the private label dairy dessert market, which the French competition authorities failed to do.