The Size of Cartel Overcharges: Implications for U.S. and EU Fining Policies

Connor, John M.; Lande, Robert H.

doi:10.1177/0003603x0605100407

Cited by 50 publications

(17 citation statements)

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“…Here a firm should take (not take) the action according to whether the private benefit from doing so is greater than (less than) the social harm. This is the welfare standard proposed by Connor and Lande (, , , ), following Landes (): …”

Section: Theoretical Derivation Of Optimal Antitrust Penalties On Thementioning

confidence: 99%

Antitrust Penalties and the Implications of Empirical Evidence on Cartel Overcharges

Katsoulacos

Ulph

2013

The Economic Journal

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This article makes two contributions to the literature linking penalties charged by competition authorities to observed cartel price overcharges. (i) It extends the theory of optimal penalties by introducing new considerations regarding the timing of penalty decisions. Drawing on a new European data set to calculate these additional factors, the optimal penalty is shown to be approximately 75% of that implied by the conventional formula. (ii) It shows that because penalties are typically imposed on revenue, a tougher regime may increase cartel overcharges. This calls into question some recent empirical findings on this issue and the potential benefits of raising penalties.

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Section: Theoretical Derivation Of Optimal Antitrust Penalties On Thementioning

confidence: 99%

Antitrust Penalties and the Implications of Empirical Evidence on Cartel Overcharges

Katsoulacos

Ulph

2013

The Economic Journal

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“…Burca (1993), Usher (1998), Jacobs (1999), Tridimas (2006), Sullivan and Frase (2008), Fish (2008), or Sauter (2013). 9 Interpreting this principle in terms of the …ne structure, it requires that the …ne should not be more than the lowest possible …ne that would induce the same market outcome, i.e., the least restrictive means (LRM) test. If …nes are considered to be socially costless, there is no reason to adopt this principle.…”

Section: Legal Principles Of Antitrustmentioning

confidence: 99%

“…EC cartel agreements, because it consists of the total sales over all the product markets in which 9 A detailed overview of the history and application of the principle of proportionality in the EU and the US is provided in Appendix A. the company operates, while only some of these markets may be involved in the collusive agreement. There is no formal legal upper bound on the antitrust …nes in the US.…”

Section: Legal Principles Of Antitrustmentioning

confidence: 99%

Legal Principles in Antitrust Enforcement

Houba

Motchenkova²,

Wen

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe study antitrust enforcement that channels price-…xing incentives through setting …nes and allocating resources to detection activities. Antitrust …nes obey four legal principles: punishments should …t the crime, proportionality, bankruptcy considerations, and minimum …nes. Bankruptcy considerations limit maximum …nes, ensure abnormal cartel pro…ts and impose a challenge for optimal antitrust enforcement. We integrate the mentioned legal principles into an in…nitely-repeated oligopoly model. We derive the optimal level of detection activities and the optimal …ne schedule that achieves maximal social welfare under these legal principles. The optimal …ne schedule remains below the maximum …ne and induces collusion on a lower price by making it more attractive than collusion on higher prices. For a range of low cartel prices, the …ne is set to the legal minimum. Raising minimum …nes will enable the cartel to raise its price and is better avoided. Our analysis and results relate to the marginal deterrence literature.

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“…A similar result regarding the insufficient deterrent effect of EU antitrust fines can be attained following an approach of Connor and Lande (2006). The European…”

Section: The Deterrent Effect Of Eu Competition Lawmentioning

confidence: 61%

“…2 See the official statistics of the European Commission: http://ec.europa.eu/competition, last accessed on June 6th, 2012. 3 It is worth noting that Connor and Lande (2006) analyze European overcharges in one section of their paper. However, their analysis is descriptive and targeted on implications for fining policies in the EU and USA.…”

Section: Introductionmentioning

confidence: 99%

Cartel Overcharges and the Deterrent Effect of Eu Competition Law

Smuda

2013

Journal of Competition Law and Economics

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Estimation results further indicate that bid-rigging cartels obtain higher overcharges than non bid-rigging cartels. In addition, we do not find changes in the overcharge level over time, implying that adjustments in EU competition law during recent decades did not lead to reservation in the price-setting behavior of cartels. Last but not least, a comparison between cartel overcharges and the existing fine level according to the current EU Guidelines shows that collusion has been a lucrative business for most firms from an ex-post perspective. In 67 percent of the cases the gain from price fixing outweighs expected punishments although the calculations are based on maximum values for cartel detection and upper limits of penalty levels. We therefore conclude that further adjustments of the EU Guidelines are indispensable in order to achieve optimal deterrence. Non-technical summary Das Wichtigste in KürzeIn den vergangenen Jahrzehnten hat sich der Fokus europäischer Wettbewerbs- Furthermore, empirical evidence suggests that the currently existing fine level of the EU Guidelines is too low to achieve optimal deterrence.

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The Size of Cartel Overcharges: Implications for U.S. and EU Fining Policies

Cited by 50 publications

References 0 publications

Antitrust Penalties and the Implications of Empirical Evidence on Cartel Overcharges

Antitrust Penalties and the Implications of Empirical Evidence on Cartel Overcharges

Legal Principles in Antitrust Enforcement

Cartel Overcharges and the Deterrent Effect of Eu Competition Law

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