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Prioritizing Cartel Enforcement

Date post: 31-Dec-2015
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Prioritizing Cartel Enforcement. Professor D. Daniel Sokol University of Florida – Levin College of Law. Big Picture Issues. Three types of cartels International cartels Domestic cartels Bid rigging Two large problems particularly for competition regimes: - PowerPoint PPT Presentation
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Prioritizing Cartel Enforcement Professor D. Daniel Sokol University of Florida – Levin College of Law
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Page 1: Prioritizing Cartel Enforcement

Prioritizing Cartel Enforcement

Professor D. Daniel SokolUniversity of Florida – Levin

College of Law

Page 2: Prioritizing Cartel Enforcement

Big Picture Issues

•Three types of cartels• International cartels• Domestic cartels• Bid rigging

•Two large problems particularly for competition regimes:

• The fixed cost for bringing cases is large regardless of the size of the jurisdiction

• Competition culture seems to be weaker in Latin America

Page 3: Prioritizing Cartel Enforcement

International Cartels• Globally greater economic damage• Overcharges have been higher in Latin America than US and Europe

BUT• Problems with evidence and relevant information• Implied threat of exit• May lead to greater protectionist backlash•Particular problem of export cartels•Remedies

Page 4: Prioritizing Cartel Enforcement

Domestic Cartels

•Social ties limit detection•Low level of fines•Powerful families own the cartel member firms•Enforcement can be seen as political retribution•Other parts of government might be creating conditions for cartels•Penalties (civil and criminal) seen as too high

Page 5: Prioritizing Cartel Enforcement

Bid rigging

• Framed as stealing from the government• Can create good will for the agency with some parts of government•Procurement agency needs to be supportive•Chilean experience: While most procurement officers were aware that bid rigging might be going on, they were unaware that such behavior was illegal and that such activity could result in significant penalties

Page 6: Prioritizing Cartel Enforcement

Creation of Competition Culture

•Difficult even in countries with longer competition histories•Need an element to moral shaming for cartel activity•Cartel crimes different from other economic crimes such as accounting fraud

Page 7: Prioritizing Cartel Enforcement

Difficulty of Creating Awareness•Studies of Australia, Netherlands, UK: Large firms are more aware than small firms, general population is not well aware•Good cases may not increase the visibility of competition law in the country if the cartels do not involve basic consumer goods. •Effective domestic cartel program requires case selection that takes newsworthiness into account (e.g., pharmacies in Chile) •Other examples: supermarkets (Bulgaria), bread (South Africa, Panama), cooking oil (Indonesia) or toilet paper (Brazil) have a chance of significant media coverage

Page 8: Prioritizing Cartel Enforcement

Cartels and Culture – Is the Public Aware?

Page 9: Prioritizing Cartel Enforcement

Ineffective Media Coverage of Cartels in the USYear Cartel news

stories (815 different newspapers)

Cartel cases filed

Stories per cases filed

NY Times stories only (narrow search on “accounting /2 fraud”)

1994 84 57 1.47 6

1995 69 60 1.15 3

1996 45 42 1.07 5

1997 43 38 1.13 6

1998 20 62 3.23 14

1999 41 57 0.72 21

2000 54 63 0.86 10

2001 61 44 1.39 20

2002 50 33 1.52 137

2003 82 41 2 158

2004 85 42 2.23 121

2005 119 32 3.72 203

2006 123 34 3.62 107

2007 128 40 3.2 48

2008 148 54 2.74 27

Page 10: Prioritizing Cartel Enforcement

Corporate Law’s Impact on Cartel Compliance

•Oversight Duties•High threshold for liability•Poor incentives for serious compliance programs (especially given antitrust strict liability regime)

Page 11: Prioritizing Cartel Enforcement

Competition Law has Ignored Insights into the Firm

•Agency costs•Organizational structure•Cultural embeddeness•Structures and methods to promote compliance

Page 12: Prioritizing Cartel Enforcement

Other possibilitiesOther possibilities

Cartel bounties Theory South Korean experience


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