Download Law and Regulation

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:
• 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 US
Year Cartel news
Cartel
Stories per
NY Times stories only
cases filed
cases filed
1994
stories (815
different
newspapers)
84
(narrow search on
“accounting /2 fraud”)
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 possibilities
Cartel bounties
 Theory
 South Korean experience