Partial Cross Ownership, Tacit Collusion and the Deficiency of Seaborne Iron Ore Pricing Power in China
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| Title | Partial Cross Ownership, Tacit Collusion and the Deficiency of Seaborne Iron Ore Pricing Power in China
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| Author | YU Zuo and Peng Shuhong |
| Organization | Center for Industrial and Business Organization DUFE, China；Business School of Jinggangshan University, China) |
| Email | yuzuo16@yahoo.cn,shuhong.peng@gmail.com |
| Key Words | Partial Cross Ownership; Tacit Collusion; China Seaborne Iron Ore Pricing Power |
| Abstract | In this paper, focusing on the problems of seaborne iron ore pricing power deficiency in China, we construct a model about the forming mechanism of tacit collusion with the firms having Partial Cross Ownership, and examine the model by the case of BHP Billiton and RioTinto in Australia. We have found the economic logic of the seaborne iron ore pricing power deficiency problems in China, which are the partial cross ownership arrangement between BHP Billiton and RioTinto facilitating their tacit collusion at the circumstance of out-of-balance between world seaborne iron ore industry structure and the china iron steel industry structure, and at the international level there are no restraints to the transnational collective abusing market power behaviors. The tacit collusion probabilities between the partial cross ownership firms increase when the higher ratio of partial cross ownership. The tacit collusion between BHP Billiton and RioTinto also facilitates their tacit collusion with Vale S.A. BHP Billiton and RioTinto or with Vale S.A.’s collusion and overcharge on the seaborne iron ore are the essential reasons of the seaborne iron ore pricing power deficiency in China. The intending merger, production joint venture between BHP Billiton and RioTinto are to facilitate their tacit collusion and acquire the effect of collusion. The Partial Cross Ownership arrangement between the iron ore firms and their secretly competition restricting conducts need the competition authority pay extraordinarily attention. |
| Serial Number | WP70 |
| Time | 2011-04-26 |
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