Dynamic and Static Effects of Horizontal Cartels in the EU

In the business ecosystem, we observe that some firms engage in collusive behavior, thereby limiting competition. By collusive behavior, firms aim to increase profits. However, the burden of such behavior is usually borne by the consumers most of the time, which is an indication of so-called welfare change. There are mainly two types of effect that arises as an outcome of cartelization: static and dynamic, which are deemed as short and long term, respectively. Both static and dynamic effects could be positive or negative, small or large, depending on the cases. This paper will give insight on the features of the cartels and introduce the effects that arise from the cartelization. It is important to distinguish these two effects as their implications on the economic welfare can be different. After introducing the two effects from the literature review, we will analyze some cases from the European Commission (EC) and Lithuanian Competition Commission and make inferences on static effects to exemplify our arguments from the literature review.