Prioritizing Cartel Enforcement
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Transcript of Prioritizing Cartel Enforcement
Prioritizing Cartel Enforcement
Professor D. Daniel SokolUniversity 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:
• The fixed cost for bringing cases is large regardless of the size of the jurisdiction
• Competition culture seems to be weaker in Latin America
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
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
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
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
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
Cartels and Culture – Is the Public Aware?
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
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)
Competition Law has Ignored Insights into the Firm
•Agency costs•Organizational structure•Cultural embeddeness•Structures and methods to promote compliance
Other possibilitiesOther possibilities
Cartel bounties Theory South Korean experience