ANTITRUST ENFORCEMENT IN PUBLIC PROCUREMENT: THE CASE OF RUSSIA

Why do people violate the law? The Hobbesian outlook would be that people violate the law in the absence of appropriate punishment. John Stuart Mill would have attributed the violation to the lack of incentives to behave legally. In this paper, we combine these two factors to examine the effect of antitrust regulation on price competition. We examine the case of public drug procurement in St. Petersburg, Russia between 2008 and 2010. Our results highlight that the Russian Federal Antitrust Service was unable to enforce competitive bidding when the main regulators interpreted the competition law differently. The Committee for Public Health in St. Petersburg notably leveraged the loopholes in antitrust enforcement and successfully maintained illegal relationships with different economic agents. We use data on Russian drug procurement to illustrate these effects. Based on our estimates, we suggest policy implications regarding antitrust policy.