Managing Cartels: how Cartel Participants Create Stability in the Absence of law

Abstract

Firms enter cartels (e.g. price-fixing; bid-rigging) in order to control market uncertainties and gain collusive profits, but face challenges in controlling the cartel itself. A challenge for business cartels is how to organise collective illegal activities without the use of formal control, such as binding legal contracts or arbitration. While one might expect that a lack of formal legal control leads to mutual conflicts and opportunistic behaviour resulting in short-lived cartels, firms often manage to continue their illegal conduct for years. This raises questions as to how firms organise their cartels in the absence of legal means. This article addresses how informal coordinating mechanisms enable cartel stability outside the scope of formal legal control. Based on an in depth study of 14 Dutch cartels, this article shows the importance of informal social mechanisms to coordinate, monitor, enforce, and compensate for the longevity of business cartels. Furthermore, the results emphasise that in order to explain cartel stability, social mechanisms that induce trust need to be considered.

Why Dutch officials take bribes: a toxic mix of factors

“…Since this study focused on a specific form of crime, bribery, in a specific context (i.e., the bribery of public officials by company representatives), further research is required in order to study whether similar factors play a role in bribery in other contexts, such as the bribery of public officials by criminal organizations instead of legitimate organizations, or bribery between private companies (i.e., private-to-private corruption, see [78]). Moreover, future studies could examine whether similar individual factors, organizational factors and relationship factors underlie people's engagement in forms of corruption requiring the involvement of multiple offenders, such as business cartels (see for instance [79]). In addition, since this study was conducted in the Netherlands, future studies are required to examine the extent to which the findings can be generalized to other cultures and societies, both Western and Non-Western.…”

Strong by concealment? How secrecy, trust, and social embeddedness facilitate corporate crime

“…Conceptually, however, it remains unclear whether elaborate communication and administration should be perceived as a function of trust or of distrust (cf. [9]).…”

“…price-fixing, bid-riggingneed to coordinate collective actions efficiently by communicating while facing the risk of exposure. Firms have to exchange information on prices, customers, tendering procedures and so on; internal issues and disputes must be resolved; and acceptable agreements on compensations must be reached between participants [8,9]. In light of increasing enforcement efforts and the criminalisation of business cartels [10][11][12], perpetrators of cartel conduct must also conceal their activities from customers, nonparticipants, and internal and external watchdogs.…”

The Organization of Corporate Crime: Introduction to Special Issue of Administrative Sciences

“…As corporate crimes are often embedded within the firm's social and professional environment, organizations often collaborate to commit and conceal crime (Bertrand et al 2014;Lord and Levi 2017;Jaspers 2017). The corporate crime literature has primarily focused on the relations between individual motives and actions, and organizational characteristics and behaviors-the vertical relationships between organizations and their members, often with a focus on hierarchy and decision making processes.…”